Textile sector jettisons abolishment of zero-rating status

Textile sector on Tuesday called the proposal in the fiscal budget 2019-20 for abolishment of zero-rating status disastrous for the leather, surgical, sports goods and carpet and garments sectors. Exporters reacted to the budget sharply, saying that it was IMF's design that sought to end the zero-rating status for five exports sectors.
They apprehended it would result in shutting down the SMEs. "Ending of zero-rating status and imposition of sales tax will bring disaster for the five export sectors," said Muhammad Javed Bilwani, chairman, Pakistan Hosiery Manufacturers and Exporters Association. He said that PHMEA rejects the budget proposition that cancels SRO 1125. He said that over Rs 200 billion of the exporters' refunds claims already stand backlogged with the government, while more sales tax deduction would increase the amount of pending refunds and would bring financial crunch for them.
"Government has not yet cleared tax claims of exporters amounting billions of rupees," Bilwani said, adding that budget contradicted the textile policy which PTI presented before coming into power.
He said that withdrawal of the zero-rating status would also pull down exports of the five sectors by 30 percent every year. He said the sales tax imposition would also hit industrial manufacturing aimed for export purposes. "The overall liquidity from manufacturing of the goods to their exports is estimated about 54 percent to get stuck," he said, adding that the government's strict economic policy would stimulate investment flight abroad and scale down the manufacturing that would eventually decline exports.
The PHMEA chairman said the move would increase unemployment that could stir law and order situation in the society. Shabir Ahmed, chairman Pakistan Bedwear Exporters Association said that the sales tax on textile sector would ruin the entire sector. He said that the government's budgetary move to end the zero-rate status is feared to cripple the country's ailing economy. PBEA head termed it the worst budget ever presented in the country's history. He said that the tax refund system, as the federal minister claimed in his budget speech, is unlikely to be streamlined. He said that the tax refunds period is now estimated to be six months hence we should not expect refund before 6 months.