Ministry of Textile Industry is mulling to impose 0.20 percent cess on all imports and exports of the textile products aimed to generate funds for development and promotion of textile sector. According to a proposed "Textiles Industry Development, Regulation and Standard Act 2017" after imposition of new development cess, the textiles value chain will be exempted from Export Development Surcharge and existing cotton cess, textile cess and cotton standardization fee will also be annulment.
Sources told Business Recorder on Saturday that Ministry of Textile Industry has sent a draft of "Textile Industry Development, Regulation and Standard Act 2017" to the all textile stakeholders and associations for their comments by July 7, 2017. The new development cess has been proposed in the draft act to collect money for proposed "Textile Development, Regulation and Standard Fund".
Ministry of Textile Industry, constituted in 2004, does not have any legal instrument to carry out some of the function assigned to it under the Rules of Business 1973, and foreseen in textile policy. Therefore, the ministry has prepared a draft law titled "Textile Industry (Development Regulation and Standard) Act 2017". The propose law provides for the development, promotion, regulation and setting of standard for textile industry in Pakistan to achieve sustainable growth, employment generation, increased productivity and value addition through the textile chain, the ministry said.
According to draft of Textile Industry Act, with a view to encourage development of textiles in Pakistan, the Ministry of Textile Industry may undertake such measurers which will induce investment, generate employment, add value to production and manufacturing activities within the textile value chain, improve productivity, promote research and development and reduce the cost of doing business.
To undertake promotional and development measurers and to monitor the performance of textile industry, the ministry of textile industry will register all textile industries units, which will provide data and information related to their sphere of operation on regular basis and when ever required by the ministry. According to proposed law, the ministry of textile industry will also establish the Federal Textiles Board, which will monitor and make recommendations to the ministry of textile industry for overall development of textiles and its allied industries and enterprises.
As per Chapter IX of draft Act, the ministry will establish, manage and operate a fund to be called the "Textile Development, Regulation and Standard Fund". The fund shall consist of all monies received by the ministry from federal government or any other source by way of grant and the proceeds of cess and all fees enacted under the proposed act.
In the Chapter X of the Textile Industry Act, the ministry has proposed a development cess, which will be levied and collected on imports and exports of all textile products. The rate of cess on imports and exports of textile products will be 0.2 percent of the value of imports as determined under section 25, or as the case may be, under section 25B of the Customs Act 1969 as valued by Customs and FOB value of goods exported converted into Pak Rupee at exchange rate prevailing on the date of first partial or short realized amount.
The cess will be applicable from the date of promulgation of this (proposed) act along with the annulment of cotton cess, textile cess and cotton standardization fee and exemption of textile value chain from Export Development Surcharge. Cess on Exports will be collected, in full, by the Authorized Dealer Banks at source from the rupee amount converted from the FCY on recent of the full export proceeds.
In case of partial/ short realization of export proceeds, the cess would be collected by the Authorized dealers at the applicable rate ie 0.2 percent of the full FOB value of the goods shipped converted into Pak Rupee at the exchange rate prevailing on the date of first partial realized amount.
In case of non-realization of export proceeds on due date in term of sale contract of within 180 days from the date of shipment, whichever is earlier, the banker will have to report the same to the customs and Ministry of textile industry. Authorized dealers will be entitled to charge per transaction separately from exporters in consideration of the services rendered by them equivalent to prevailing for Export Development Surcharge for non-textile items.
The fund distribution in various projects and scheme shall be done keeping consideration sectoral and geographical contribution as well as priorities set by the board with minimum allocation of 50 percent to relevant sub-sector for its contribution in cess collected on exports.
As per proposed Act, Pakistan Cotton Research Council and Pakistan Cotton Standardization Insinuate will be solely entitled for utilization of cess collected by the fund equivalent to Rs 50 per bale on cotton subject to cap of 15 percent of value of cotton domestically produced or 20 percent of the total cess collected, whichever is less.
According to Chapter XV of act, with the annulment of "The Cotton Cess Act 1923", the Pakistan Central Cotton Committee will renamed as Pakistan Cotton Research Council and will be responsible for research, development, standardization, skill development, technology advancement, modernization, testing and manufacture of cotton.
Meanwhile, Shabir Ahmed Patron in Chief of Pakistan Bedwear Exporters Association has said that Bedwear exporters will not support the proposed legislation. Laws and regulations already exist for the development, regulation, and standards of Textiles. If Ministry wishes to assume powers under the existing corpus of laws it should take it up with the relevant Ministries rather than burden the industry with more laws, he said in his reply to the Ministry of Textile Industry.
"We see nothing in the draft Act that addresses the core issues that the Industry is grappling with", Shabbir added. He said that if the proposed law is enacted industry would end up with more bureaucracy in the name of implementation of the objectives of the law, creating more problems for the industry.
"We are already faced with a liquidity crisis and loss of competitiveness due to expensive utilities, high cost of doing business, blocked refunds etc, therefore we are demanding the government to abolish the Export Development Surcharge. In this situation, proposal to levy yet another cess is indeed most insensitive," Shabbir said. He said that the world is moving towards deregulation and those who resist it are paying a heavy political price. "If the ministry really wishes to help the industry it should call a "Jirga" (Grand Meeting) of industry representatives where we will put to you our real issues, and hear from you how you propose to solve them," he urged.
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