A delegation of All Pakistan Textile Mills Association (Aptma), led by its Chairman Syed Ali Ahsan held meetings with secretary finance and revenue, federal secretary petroleum and federal secretary power to represent and resolve issues being faced by the textile industry. The key issue was that the notification of regionally competitive gas tariff @ USD 6.5/mmbtu effective July 1, 2019 for the period of one year be issued for which subsidy of Rs 24 billion has been allocated in the Budget 2019-20.
The secretary finance assured that another meeting will be held with Aptma management on Monday (July 22) wherein representatives from ministries of petroleum and power will also be invited so that notification of energy tariffs (both gas and electricity) for 5 previously zero-rated sectors be finalized and issued. The SNGPL charged arrear amount on account of non-receipt of subsidy from March onwards with LPS in June bills 2019 wherein industry has already submitted postdated cheques of arrear amount to SNGPL.
In the meeting held with secretary petroleum, it was informed that summary in respect of non-issuance of subsidy from March onwards to SNGPL is being prepared for consideration and approval of Economic Coordination Committee (ECC). In the meeting held with secretary power, it was informed that clarification is being sought from Finance Ministry for continuation of electricity supply at US cents 7.5/kWh to five previously zero-rated consumers from July 1, 2019 onwards.
A joint meeting was also held with Abdul Razak Dawood, Advisor to the PM for Commerce and Textile, Industry, Production & Investment and chairman FBR wherein the followings issues were discussed and decisions made thereon: (i) withholding income tax on import of machinery will be 1 % as was previously available under SRO 1125 and not 5.5 %. Clarification will be issued on July 22, 2019; (ii) new expeditious refund mechanism for exporters has been drafted.
The FBR would post draft notification on its website to seek comments/ input of the stakeholders. The mechanism is that refunds to exporters will be immediately paid after the filing of return; (iii) Aptma represented that majority of cotton is procured by the industry within the period of 3 months for which major amount of refunds would remain stuck up and registered person would not be able to claim refund/ adjustments. The Aptma proposed that either rate of sales tax on cotton be reduced to 5 % from 10 % or sales tax payment be deferred till consumed.
Furthermore, buyer of cotton (spinners) be allowed to make payment of sales tax on cotton under special ginning rules. The member/chairman FBR assured to consider this proposal; (iv) issue of inadmissibility of input tax in case CNIC is not provided is harsh and therefore be withdrawn. Secondly, 3% further tax on sales to unregistered person be also withdrawn. There should be one rate of sales tax for registered and unregistered person.
The word "good faith" in case of sales to unregistered person needs to be defined that seller will never be prosecuted in case CNIC is subsequently found fake. Date for providing CNIC be extended for further one quarter, ie, 3 months so that unregistered person be given opportunity to register himself; (v) clarification that withholding tax on local supplies is 1% and not 4%.
The chairman FBR assured that the clarification that 1% withholding tax as was applicable under SRO 1125 would be issued on July 22, 2019; (vi) withholding tax on import of raw materials is 1% and not 5.5%. The chairman FBR informed that WEBOC will be updated that day; vii) 10% sales tax and 3% additional tax on import of machinery be withdrawn for both Greenfield and Brownfield projects.
The chairman FBR assured that initially it will be for Greenfield projects. 10% sales tax on machinery for Brownfield projects may not be considered at this stage;(viii) the chairman FBR desired Aptma to provide cases of deferred payment not being processed to him for onward direction to concerned Chief Commissioner/ RTOs/LTUs;(ix) issue of promissory notes of 10% was raised that banks are not accepting for discounting.
The 10% rate being low be raised to prevailing policy rate. Ministry of Finance will take up this matter with State Bank of Pakistan and; (x) on the issue of providing level playing field to the local industry and imports under exemption schemes, substantial data and proper arguments were presented by the delegation to ensure that domestic industry is protected.