The Research and Development (R&D) support at the rate of six percent will be allowed only for textile garments exports to the European Union (EU) and USA. Earlier it was also allowed on exports to the Gulf and Africa with the condition that these shipments would be scrutinised very minutely. The original SRO No 437 (1)/2005, issued by the Ministry of Commerce on May 18, 2005, has been amended to qualify exports for the R&D rebate made only to the EU and USA.
The changes in the order have been made by the ministry following objection from the State Bank of Pakistan, which said that the rebate facility would be misused on shipments of garments, made to Dubai and Saudi Arabia.
The original SRO provided that " they will scrutinise those claims more minutely, which are based on exports to African and Gulf countries". This clause has been omitted in the new SRO, which added a new sub-paragraph to the effect. " This research and development support shall be allowed only for textile garments exports to higher quality conscious markets of the EU and USA.
The original SRO had allowed the R&D rebate to the garment exports from April 12 but its implementation was stopped by the ministry after apprehensions about its misuse were expressed by the State Bank.
There were instances of gross over-invoicing of exports of textiles to the Gulf and Africa in the past by some unscrupulous exporters, who later fraudulently claimed huge duty drawbacks. To check the practice of over-invoicing the new SRO on R&D support has excluded shipments to the Gulf and Africa from the purview of the compensatory rebate.
The relief package in the form of six percent R&D support has been formulated by the government for garment exporters to help them compete in the EU market after the expiry of Generalised System of Preferences (GSP) from January 1, 2005, which exposed Pakistani garments to a 12 percent duty.
The Ministry of Commerce has sent copies of the new SRO to the State Bank and chairmen of the concerned associations, including PAKSEA, PRGMEA, PHMA and PCFAME.