Federal Textile Minister, Chaudhry Mushtaq Ali Cheema has announced that deferred sales tax refund cases delayed on minor objections would be settled urgently to facilitate the exporters.
He further announced that minor objections regarding mismatching of companies in the Sales Tax Starr System and the late receipt of Mate Receipts (MR) from Karachi against shipments made up to 30th September 2005 will be over ruled and the sales tax refund in such cases will be allowed.
Addressing members of the Pakistan Textile Exporters Association here late Friday the minister said that the government is attaching great importance to boost the exports for consolidation of the country's economy. He said it was a great favour to the exporters by the present government that the sales tax on the exporting units and companies have been made zero rated.
He said that the concession of zero rate sales tax was applicable to all those exporters who had purchased the yarn and cloth till 5th June 2005 and they were required to exhaust their stocks till 30th June and later on pressing demand of the exporters, the exhausting date was extended to 30th September 2005.
He said that the exporters are of the view that in case of yarn, their stocks are exhausted within a one month period while it takes two months in case of cloth. The consume the stock of home textiles, 3 months are required whereas in case of garments at least 5 months are required for their processing and finishing. He said that the exporters are now reminding that the consumption date of the stock should now be enhanced to 31st December 2005.
He said that a 4-member committee of the PTEA and Sales Tax department should be constituted to thrash out the demands of the exporters and submit their recommendations to the government.
He, however, assured that the settlement of the sales tax claims pertaining to the stocks before June 6, 2005 and the extension in their consumption date will be considered by the government. Earlier, Rana Arif Tausif, Chairman PTEA in his address of welcome said in the meeting that as per official statistics 20 percent increase in textile export was registered but the factual position is uptill August this year, there was 16.3 percent declined in Pakistani textile exports.
He said that during the last 4 months (June to October 2005) the textile fabrics exports registered a decline of 38 percent. The main factor for decline in the textile exports is the heavy cost of production in Pakistan whereas the exports in neighbouring Bangladesh is exempt from income tax for a period of 10 years, there is no import duty on import of machinery and its spare parts whereas in Pakistan the import duty ranges from 5 to 20 percent.
In Bangladesh, per unit rate of electricity is 2 takka while in Pakistan per unit electricity rate is Rs 5. There is no oldage, social security, gratuity in Bangladesh but in Pakistan all these taxes are levied. He demanded that the textile machinery should recommend to the government total exemption of taxes for textile industry so as to compete with out contemporaries in world market. He also urged the textile minister to intervene for early settlement of the sales tax claims pending with local sale tax department for the last two years on minor objections and also ask the Collector Sales Tax to clear all the refund cases detained due to non entry in the Starr System on minor objections. The PTEA Chief also demanded that the textile ministry should help the association for purchase of EZO Dyes Testing Machinery out of export development fund. The minister assured that he would again take up this matter with Prime Minister and Chairman Central Board of Revenue.
Regarding the pending sales tax refund claims for the year 2003 and 2004 which have been deferred by the sales tax department on certain objections and lacking of documents, the minister emphasised that the exporter should remove these objections and provide the required documents to sales tax department so as to settle these refund cases.
Continuing, the Textile Minister said that under the changed world's scenario and elimination of quota system, the textile sector in Pakistan should be ready to compete with India, China and other South Asian countries and to achieve this objective, we should minimise our cost of production, create ample job opportunities, to make surplus production and include the quality of goods so as to compete in the world market under WTO.
He asked the PTEA members to prepare a comparison of the Pakistan textile sector with that of Bangladesh and India. He said that China is big country holding the world economy and a big supplier of consumer goods whereas USA is not only a Super Power but also possess the biggest consumer market in the world, hence, we cannot compare us with both these countries. The minister exhorted the exporters to provide similar documents to sales tax department, which they provide to custom department so as to get the refund.
The Textile Minister said that the exporters would not get the sales tax adjustment until they physically export the goods on genuine documents. He said that only exporters are entitled zero rated sales tax and assured that the exporters who had paid the sales tax after 6th June 2005 will get the zero rated facilities.
He said that under the government has already be registered those retailers having annual sales upto Rs 5 million but even the de-register retailers had filed their invoices erroneously which would be treated as cancelled. Reverting to the adjustment of the exporter's claims the minister said that more than 90 percent parties will get adjustment.
He cited the example of Faisalabad exporters and said that there are 129 exporters in Faisalabad who are entitled for sales tax refund in the light of utilisation of the stocks.
Out of these, 76 exporter's claims having value of Rs 14 million with sales tax department while 27 exporters having a claim of Rs 60 million and 14 exporters having claims of 640 million and 3 exporters having claim of 400 million are pending for settlement.
The minister said that instead of knocking the door of court, in stock consumption cases, the exporters and sales tax department should settle the claims out of court through negotiation. The Textile Minister said that he had convened a meeting of various trade associations who had been stressing for fixed sales tax.
He asked them that the sales tax could be abolished in case they increase 1 percent in their income tax return but they did not adhere to their commitment and raised the income tax by 0.25 percent. He said that the government took a U-turn on sales tax abolition after 10 years and it was now the duty of exporters not to misuse this facility.
The minister said that after the expiry of 30th September 2005 as last date for exhausting the stocks of exporter, the suppliers manipulated to supply the yarn and cloth to exporters on fake invoices of previous dates. The minister told that the volume of sales tax refund claim filed by the exporters during June 2004 was Rs 7 billion whereas in June 2005 the exporters filed refund claims of to the value of Rs 12 billion.
He added that the government is of the view that why the excess refund claims of Rs 5 billion be settled. On this, prominent exporter, Mian Muhammad Latif said that the government should order for audit of the refund claims to ascertain how much were genuine cases and how much were fake cases of refund. He said that why the genuine exporters are punished on the pretext of those who filed claims on fake invoices.
He said that in case the sales tax department apprehends any exporter for getting the claims on fake invoices, the PTEA would not support such elements. He said that the genuine exporters have already deposited billions of rupees as advance payment of sales tax and they are justified for claiming the refund of this amount.
Shahzad Ali Siddiqi, Chairman Pakistan Dry Ports Association and Chairman, Faisalabad Dry Port Trust, Azhar Majeed, Mian Anwar Sajjad, Sh. Ashfaq Ahmad, Mian Muhammad Arshad, Sh. Mukhtar Ahmad, and Chaudhry Muhammad Siddique, renowned exporter urged the minster to help them for settlement of their claims pending with sales tax department and the excess money received by the government from the exporters on account of sales tax should be refunded.
They also demanded a grace period of at least 2-3 months to clear the piled up stocks of the exporters.
They also expressed concern on raising of bank's mark up from 8 percent to 13 percent and the anti dumping duty by European countries and urged him to recommend to State Bank of Pakistan for bringing down the bank's mark up to 8 percent so as to over come the recession in textile.
Mian Muhammad Saleem, local exporter diverted the attention of textile minister about slow down of Sui gas pressure and shut down in Faisalabad due to which 4 textile mills on Sheikhupura road have been closed down. The minister assured that he will take up the matter with Sui gas authorities.
The Collector Customs, Ikram Ullah Ghauri and Collector Sales Tax, Shafqat Mahmood were also present in the meeting.