The Pakistan Tanners Association (PTA) has said that the promissory note against the sales tax refund claims are being issued at 10 percent mark-up whereas KIBOR is almost at 14 percent and it urged the government to link the mark-up of promissory note with KIBOR.
Pakistan Tanners Association (PTA) Chairman Agha Saiddain told Business Recorder on Monday that though the Federal Board of Revenue has reduced income tax on the imports of chemicals, machinery and spare parts being used in the tanning industry from 5.5 percent to 1-percent, yet the WeBOC System is still charging 5.5 percent mainly due to lack of proper up-gradation/intimation of the system.
He said following exorbitant increase in taxes on our imported inputs added with increase in minimum wages and energy cost will destroy leather sector and we cannot sustain with this burden.
He said 40 percent of leather sector closed their operations in last five years and our exports dropped from US$1.220 billion in 2007-08 to US$0.948 billion in 2017-18 whereas Bangladesh and India recorded an increase of 224.54 percent and 55 percent, respectively.
The PTA Chairman further claimed that the local investors are being treated discriminately in taxation. The government provides all sort of VIP protocol to the foreign investors whereas if local investors import machinery for modernization and up-gradation of their units, they are charged total 17 percent sales tax out of which 10 percent is received in advance through cheque and asked to submit indemnity bond for remaining 7 percent which is sheer injustice and discrimination to the local investors.
He urged the FBR authorities to obtain indemnity bond for the entire 17 percent sales tax amount. The authorities should keep a check on the industries to ensure utilization of imported consignments. In case of violation, the authorities may charge full amount of sales tax against the indemnity bond.
He said that hides and skins being agricultural produce are exempted from sales tax and withholding tax but government is charging 17 percent and 1 percent income tax on import of raw skins/hides, pickle, and wet blue. Since tanneries in developed world were closed due to environmental issues and higher labour cost as such India, China, Bangladesh and Pakistan are importing hides and skins from these countries and after value addition re-export the same, he added. Pakistan will be deprived of this opportunity if sales tax and income tax is charged on hides/skins, pickle, and wet blue, he said, and urged the government to allow the import of raw, pickle, and wet blue skins without sales tax and income tax.
He further said there is no mechanism as how an importer will claim refund of sales tax due to the reason that this imported material is purchased by small tanneries that produce leather and sell same to the exporters in Sialkot and other markets, he added. Agha Saiddain said that FBR had reduced the duty drawback rates without any justification. After a long exercise of three years, the IOCO (Input-Output Coefficient Organization) finalized the duty drawback rates and forwarded to FBR for implementation. Without any reason, the FBR unilaterally slashed duty drawback rates of IOCO on finished goat/sheep leather, finish cow/buffalo leather/ cow buffalo leather of 2.5 mm and above thickness by 20.89 percent, 21.96 percent and 16.78 percent, respectively.
He demanded of the FBR authorities to implement the duty drawback rates worked out by the IOCO. The PTA chief suggested the government to reduce the sales tax rate to 7.5 percent to share the burden with exporters as 17 percent sales tax and 3 percent additional sales tax is undue burden on the exporters.
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