The Federal Board of Revenue is working on implementation of new value-added tax under the International Monetary Fund (IMF) conditionalities to substitute the general sales tax that could result in withdrawal of zero-rated facility provided to the five export-oriented industries, including textile, leather, sports, surgical and carpet in the 2005-06 Federal budget.
The zero-rated facility was provided to the exports sector in the backdrop of massive flying invoices, which were submitted by the fraudulent exporters, who submitted bogus claims and got refunded huge amounts in connivance with the FBR officials.
As a result, the sales tax refunds remained considerably more than the revenue collected on this account that paved the way for declaration of zero-rate for the exports industries, said Pakistan Tanners Association Central Chairman Aga Saiddain while talking to Business Recorder here on Tuesday. He said the zero-rated regime was introduced after considering all aspects of this scheme and its benefits for boosting the country's exports.
He further said that while introducing zero-rated system, the government had taken into consideration the liquidity problem faced by genuine exporters whereas the people involved in bogus claims were only benefited. Aga said the government had also conducted the study on amount under the general sales tax (GST) deposited and the amount refunded to the exporters.
He said that the amount claimed by the exporters was much higher than the collection. Many cases of fraudulent claims were still pending in various courts. Besides, the Federal Board of Revenue had blacklisted many suppliers that put the genuine exporters, who had purchased various inputs from such suppliers into trouble, he added.
While the government had made it mandatory for the exporters to pay back to the supplier within 180 days, the sales tax claims were being paid even after about one year. The exporters were busy all the time to give explanations to the sales tax auditors, obviously this had resulted into corruption and other evils, Aga said. Taking into consideration all these problems, he said the government had finally decided to declare five major exports industries as zero-rated.