APTMA Punjab demands restoration of zero-rating regime

In the wake of 64 percent plunge in export of textile products during April 2020 as compared to corresponding month of April, 2019 and plummet of domestic sales to the lowest ebb, Chairman All Pakistan Textile Mills Association (APTMA) Punjab Zone Adil Bashir has demanded restoration of the zero-rating regime for the five export oriented sectors to give a fillip to textile industry in its endeavours to upsurge local production and exports and to save millions of job. He has urged the government of adopting bold out of box measures to overcome cash liquidity issues of textile industry.

In a press statement issued here on Thursday Adil said that during the month of April 2020 textile and clothing exports have nose dived to US$ 403.84 million as against the export of $1,138.35 million in April 2019 registering a steep fall of 64.52 % on month-on-month basis which should ring alarming bells for the concerned official quarters.

He also that the trend of exports set in April 2020 is very frightening as Pakistan's annual exports to EU countries and USA exceeding US$ 10 billion are fraught with risks due to deferment or cancellation of export orders consequent to corona lockdown and liquidation or closure of many retail chains. It means not less than US $2.5 billion of export proceeds not coming in or at least being delayed by up to six months or beyond depending on the market behaviour.

He averred that textile industry is backbone of the country with more than 60% of country's exports and the largest employer with wide spread employment to professionals, skilled and unskilled workers.

He further said that in the current economic melt down, the only way forward is to mitigate adverse effects of COVID-19 by ameliorating cash liquidity.

He appreciated the timely, targeted and effective measures adopted by the Government and State Bank of Pakistan to arrest industrial decline, boost up exports and to retain the jobs. He continued that in order to provide impetus to the measurers already adopted and to further improve cash liquidity issues, there is an urgent need to restore zero rating on textile industry. He recalled that zero rating regime was introduced in the country in 2005-06 with the declared objectives of eliminating cash liquidity issues, wiping out stocks of refunds of billion of rupees stuck up since long, avoid unproductive waste of man hours in chasing tax refunds and to eliminate additional costs born on filing and follow up of refunds.

Adil stated that sales tax at standard rate of 17% was imposed on textile industry with effect from July 2019 with the lofty claims of FBR of processing refund claims within 72 hours through the newly developed "FASTER" software system. He claimed that the dreams of FBR have not yet been translated into reality due to inherent loopholes, infirmities and snags in the system. FASTER still lacks basic provisions like section 8B, eight digit HS Code etc which hamper and retard the system. He raised eyebrows on the working of FASTER and stated that due to inherent weaknesses and infirmities of the system a large number of taxpayers have not yet been able to even file Annex H their which is evident from the fact that date of filing of Annex H for the period July 2019 onwards has been extended to June 2020. Commenting on the claims of FBR of clearing sales tax refund of Rs.56 billion, he stated that most of the sanctioned amount of refund relates to the period prior to July 2019 and not the post July 2019 era. He elaborated that the claims filed through FASTER are mostly deferred on false pretexts and flimsy grounds to avoid payment of due amount of refunds. He lamented that the inefficiencies of the system have virtually crippled the smooth working of sales tax refund system which was committed at the time of withdrawal of zero rated regime. He added that holding up of refunds coupled with unprecedented descent in exports and local sales have played havoc with financial viability of textile manufacturers.

He said the business outlook post-COVID-19 is bleak and current Sales Tax mechanism of Faster is no longer workable. Under these circumstances, it is not possible to expect the whole value chain of textile industry to keep on paying Sales Tax in the absence of cash flow. He, therefore, appealed to the Prime Minister to personally intervene in the matter and direct the Finance Ministry for immediate restoration of zero-rating regime for textile sector in the Federal Budget 2020-21.

He, however, endorsed the need for collection of sales tax on textile products consumed locally and proposed that government should collect due amount of Sales Tax at Points of Sale (POS) to ensure that local consumption is duly taxed and handsome amount of revenue is generated for the government.