Reiterating its demand of withdrawal of 2 percent sales tax on export-oriented industry, the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) pointed out that even today outstanding refunds of Rs 60 billion are pending before different revenue collecting agencies at federal and provincial level for several years.
Referring to a scuffle of the Income Tax Department officials and office-bearers of the Lahore Tax Bar on the issue of refund claims of sales tax, PRGMEA Central Chairman Sajid Saleem Minhas questioned that how the FBR would handle the case after ending zero rating regime and piling up more cases of refund claims by imposing SRO 154(I) 2013. Over Rs 60 billion of value-added textile sector's refunds of sales tax and duty drawback regime are already stuck with the government departments creating liquidity crunch and hampering the export growth, he added.
PRGMEA Central chairman said that huge amounts of working capital of the exporters are held up by the FBR in refund regimes of the Sales Tax, Special Excise Duty, Custom rebate and drawback of local taxes. Even after necessary approvals and issuance of RPOs, a large number of refund claims are lying unpaid without any cogent reason. He said that deprived of the cash flow, the exporters were unable to sustain their export turnover and hence the decline in exports, they argued. Growth in textile exports have come to a halt and a gradual meltdown in exports have started. They urged the caretaker government to focus on consolidation and strengthening of economy and uplifting the industrial productivity in the country.
He recalled that in 2005, the FBR had declared textile, leather, surgical goods, sports goods and carpets as zero-rated sector to encourage exports and ensure relief to exporters from cumbersome refund process but the SRO 154(I) 2013 has pushed them again into the refund regime.
He suggested that status of zero rating be maintained through withdrawal of SRO 154 and the FBR should strive to ensure growth in the industry so that more revenue could be generated. "Export is the most well documented sector of the economy and hence its growth means more revenue for the government," he observed.
He questioned the wisdom of collecting the tax from the industry when the Federal Board of Revenue (FBR) will eventually be refunding the amount. "The hassle faced by the industry in refunds is well known to all. Several refund cases dating back to several years are pending with the FBR. He deplored that the FBR has not learnt from the past and has again levied a two percent sales tax on all textile products, whether meant for local consumption or exports. He said this will again raise the issue of refunds.
If the FBR was interested in broadening of tax net, it must impose GST at retail level, a practice which is done all over the world. He said that FBR is creating troubles for the registered persons who were already doing businesses in the presence of multiple internal and external challenges including energy crisis due to which 40 percent export suffered.