Value-added textile sector on Tuesday urged Prime Minister Imran Khan to immediately restore zero-rating of sales tax (0%) No Payment No Refund System to save the very export industry.

Also, it appealed to the PM to direct the FBR for instant release of refunds otherwise thousands of SMEs will close down in next few months with drastic downfall in country's exports and foreign exchange earnings which will create an economic fiasco affecting all segments of the economy.

Addressing a joint press conference at PHMA house, Chairman Pakistan Apparel Forum, Muhammad Jawed Bilwani said around 45 SMEs of value-added textile units in Karachi closed down due to stuck-up liquidity in shape of Sales Tax with the FBR.

He said the government's anti-business taxation policy has compelled more than 45 SMEs units for closure as their major working capital/liquidity has been stuck up with the FBR.

Monthly exports of textile USD 1.1 billion equals to Rs 171 billion, if we deduct 14 per cent sales tax on Rs 171 billion, it amounts to Rs 24 billion. In just last four months of the current fiscal year around Rs 96 billion of textile exporters' liquidity held up with the government. Approximately, Rs 72 billion in shape of 14% sales tax is stuck up in advance purchases of raw material to meet the future export orders.

Total Rs 168 billion of textile exporters are held up in sales tax in July-Oct 2019. Approx. Rs105 billion of textile exporters are pending in old sales tax refunds, customs rebate, withholding, DLTL & DDT Claims.

He said Promissory Bonds worth of Approx. Rs 22 billion against their Sales Tax Refund claims prior to 1st July, 2019 are issued to exporters which are useless as banks are not accepting these bonds. Accumulated amount of Rs 295 billion of textile exporters are held up with the government.

Four months (33% of the FY2019-20) have been passed but FASTER system is not 100% operational and the government has failed to honour its commitment to refund in 72 hours of filing of sales tax return and refund claims.

Before abolishing SRO 1125 - 0% sales tax for five export oriented industries - the government committed that sales tax refund claims payments will be paid immediately after submission of GD like Bangladesh Model and if the government fails to make swift payment to exporters and unsuccessful in the implementation of new refund system in three months, will restore SRO 1125 - zero rating of sales tax (0%) - no payment no refund regime for the five export sectors.

Later, the government has introduced FASTER refund system for five export sectors by which sales tax refunds for exporters to be paid within 72 hours. FBR also gave assurances to exporters the new refund system will be user-friendly and refund will be processed without human involvement. However, this system is very cumbersome and complicated process. To crown this all, irony of the situation is that FASTER system is still under-process and not completed yet.

Chairman (SZ), Pakistan Hosiery Manufacturers & Exporters Association, Khawaja M Usman, Chairman, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association, Ahmed Chinoy, Chairman, Pakistan Cloth Merchants Association, Haroon Shamsi, Chairman, Towel Manufacturers Association, Kamran Chandna, Chairman, Pakistan Knitwear and Sweater Exporters Association, Shaheen Merchant, Chairman, Pakistan Denim Manufacturers & Exporters Association, Arif Lakhany, Chairman, All Pakistan Textile Processing Mills Association, Shaikh Safiq, Central Chairman, Pakistan Readymade Garment Manufacturers & Exporter Association also spoke on this occasion.

They said it is a great irony that FBR vide SRO 747(I)/2019 dated 9th July, 2019 has withdrawn the exemption of sales tax and federal excise duty on buying of locally procured input goods by Export Oriented Units under SRO327.

The then Member Customs, FBR during his visit to PHMA in October, 2018 announced that effective from January, 2019 onwards, Custom Rebates shall be paid electronically with Export Proceeds as a result of system automation, however, the plan has not been turned into reality as currently eleven months backlog is prevailing.