Revival of zero-rating regime no more an option: PM Imran Khan

PM Khan told the textile barons that government was willing to resolve all the post-zero-rating regime issues of the industry but the scheme would not be revived now. A delegation of textile and clothing sectors as well as president FPCCI along with other businessmen called on the prime minister.

zero-rating

News Desk |

Prime Minister Imran Khan made it clear to the textile industry that the government was ready to resolve its genuine concerns but the revival of the zero-rating regime was no more an option in the current situation.

PM Khan told the textile barons that government was willing to resolve all the post-zero-rating regime issues of the industry but the scheme would not be revived now.

The premier said it during a meeting with a delegation of textile and clothing sectors as well as the president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Daroo Khan Achakzai along with other businessmen.

The industry proposed to the government to get tax from goods sold in the local market and the same should be collected by registering wholesale and retail sectors.

Subsequently, the delegation assured PM Khan that the business community would stand by the government’s economic reforms agenda and fully cooperate to take forward the process of economic reforms.

The government has withdrawn the zero-rated reg­ime for five sectors — textile, leather, carpets, sports, and surgical goods — and imposed a standard sales tax rate of 17percent on all items.

Collecting Sales Tax on Textile Manufacturing Sector not Feasible: Textile Sector

Meanwhile, Dawn reported, a press release of the textile sector claimed that during the last 10 years exports of five zero-rated sectors had gone up by 37 percent in terms of value. However, it added, due to the devaluation of the rupee over the past four months, exports had increased but in quantity only.

Read more: Govt. should step up to increase textile export

The textile industry exports more than 80 percent of its products, the paper said, adding that collecting sales tax on the remaining 20 percent from the textile manufacturing sector is not feasible and saner thing to do.

The industry proposed to the government to get tax from goods sold in the local market and the same should be collected by registering wholesale and retail sectors. Disturbing the manufacturing sector for a mere 20 percent would not be a wise decision.

Earlier, the Lahore Chamber of Commerce & Industry (LCCI) had urged the government to restore the zero-rating regime for five export sectors as it has caused unrest among the businessmen.

Government Abolishes Zero-rating Regime for Five Exports

On June 12, an English daily reported, the government abolished sales tax zero-rating regime for five export-oriented sectors – textile, leather, carpets, sports goods, and surgical goods – and imposed 17 percent sales tax on items covered under SRO 1125(I)/2011.

The FBR said that reduced rates for finished goods are also harming revenues, adding huge misuse of SRO on import of fabric and processed fabrics has been reported.

Senior FBR officials had said that the FBR would generate Rs80-90 billion revenue from the imposition of sales tax on textile, leather, carpets, sports goods, and surgical goods during 2019-20.

“We have accepted the biggest challenge for timely payment of refunds to the textile sector by abolishing sales tax zero-rating regime for five export-oriented sectors. The abolition of the SRO 1125(I)/2011 is the big challenge for the FBR,” the paper quoted FBR Member as saying.

According to the Finance Bill 2019, SRO 1125(I)/2011 provides for zero-rate of sales tax on inputs and products of five export-oriented sectors.

Read more: Government should have one Export Policy for all sectors of Industry

The objective was to resolve the delay in refund payments. However, zero-rating has created a loophole and the benefit is being availed by unintended beneficiaries/non-exporters. The FBR said that reduced rates for finished goods are also harming revenues, adding huge misuse of SRO on import of fabric and processed fabrics has been reported.


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