The five zero-rated sectors are stuck to their demand of continuation of sales tax zero-rating regime under SRO No 1125 on the apprehension of refund blockage and increased cost of production, which will make them uncompetitive in the regional market. "Though the government came up with the proposal of reduced sales tax of 7.5 percent, exporters never accepted it," said Chairman Pakistan Apparel Forum Javed Bilwani while talking to Business Recorder at the Parliament House Wednesday.
At the Parliament House, senior FBR officials told Business Recorder that the FBR has proposed 17 percent sales tax on local supplies of these sectors and the government would take a final decision in this regard.
Javed Bilwani, who is also convener five zero-rated sectors, said that the government has not given them any commitment of reduced rate of sales tax at 7.5 percent on local supplies of textile, leather, surgical, carpets and sports. Before the announcement of the budget (2019-20), there were discussions with the FBR on the reduced rate of 7.5 percent, but exporters rejected it by saying that the reduced rate is not feasible.
To a query, Bilwani said that they never proposed reduced rate of 7.5 percent on local sales, but wanted continuation of sales tax zero-rating regime under SRO No 1125. He added that the industry's refunds have been stuck with FBR for years, adding he does not think there can be any improvement in the refund system. He further said that GST will destroy the industry including Sialkot-based small and medium industry. He also explained the reasons for not supporting GST on five zero-rated sectors.
He said that value added textile export sector is perturbed and worried over the government's proposal to discontinue zero-rating scheme by abolishing SRO No 1125 as it will be a deadly blow on exporters' liquidity which will create hardships for exporters, eliminate SMEs and exports will decline to approximately 30 percent in the next fiscal year. To save the export sector, zero-rated scheme of 'no payment no refund' of sales tax must be continued.
Bilwani said that export sectors have refused to accept the government's new tax regime and discontinuation of zero-rating of sales tax i.e. no payment no refund status.
Meanwhile, the Senate Standing Committee on Commerce and Textile has also recommended the Finance Ministry to sit with the concerned ministry dealing with the five zero-rated sectors and find out solution of 17 percent General Sales Tax (GST).