Around Rs 80 billion sales tax refunds of textile industry have been stuck due to complicated refund procedure, the representatives of All Pakistan Textile Mills Association (APTMA) and Karachi Cotton Association (KCA) said.
They said that the industry opted for the promissory bond option to support the government in tough monetary conditions but the bonds were issued without sovereign guarantee. In this situation, the country's textile industry is facing worst-ever liquidity crunch and some units are at the verge of closure, they added.
Aptma Chairman Amanullah Kassim and KCA Chairman Khawaja Muhammad Zubair while speaking at a joint press conference at Aptma House Tuesday said.
Yasin Siddique, former chairman Aptma, Atif Dada former chairman KCA, Zahid Mazhar, Tariq Saud, Asif Inam and other senior industrialists were also present on the occasion.
They said since introduction of new sales tax regime, the export oriented textile sector has paid around Rs 80 billion as input tax. Due to newly introduced tax filling procedures, exporters are unable to file their refund claims. This has caused the entire sales tax refunds to be stuck; resultantly industry is facing a serious liquidity crisis, they added.
They said that the sales tax refund filing procedure has been made so complex that it is impossible for most of the exporters to file the claim in such a way that it fulfills all the requirements prescribed by the FBR, which makes the refunds possible.
The FBR introduced Annexure H for automatic stock reconciliation and refund calculation. However, Annexure H is being rejected arbitrarily without any details of discrepancies even RTO does not provide the reasons of discrepancies. Unless annexure H is accepted electronically, ERPO cannot be processed and refund cannot be granted.
They said that toll manufacturing sales tax refund claims cannot be filed because GST on services is a provincial subject and there is no coordination between provincial revenue authorities and FBR. In addition, related HS codes for services need to be standardized.
They said that the industry which opted the promissory bond option to support the government in tough monetary conditions are still waiting for discounting mechanism; whereas others are getting 100 percent cash. Bonds have been issued by special purpose vehicle (SPV) of FBR.
They pointed out that the bonds are not guaranteed by government of Pakistan and do not carry sovereign guarantee. There is no date mentioned on these bonds for encashment and only assurance is that the bonds will be paid in time, they said adding that the encashment of these bonds are also not clear and the mechanism of encashment has not been clarified. These bonds carry a 10 percent simple interest and the bonds issued are not of any value as no bank is willing to discount them.
Under these circumstances and without a sovereign guarantee no bank in Pakistan is willing to discount these bonds, they said and suggested that the bonds should carry sovereign guarantee and should be backed by government of Pakistan. The bonds should be allowed to be used for payment of any government dues such as sales tax/income tax or any other FBR dues and the Rs. 100,000 bonds should have redemption value of Rs. 145,000 in order to have a par net value. They also said that the bonds should carry maturity date and same should have detailed procedure for encashment.
The Aptma chairman said that the documented, compliant, organized textile industry fully supports the government's drive for documentation, transparency and collection of increased funds and taxes. The pending refund claims of Rs 180 billion have eroded the financial viability of textile export sector which tantamount to butcher the only available "golden egg laying hen."
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