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Tuesday, April 16, 2024

Withdrawal of zero-rated facility causes unrest among businessmen

The LCCI President Almas Hyder, Senior Vice President Khawaja Shahzad Nasir and Vice President Faheem Ur Rehman Saigal said that export revenues will also be affected by the withdrawal of this zero rated facility and this will potentially create a balance of payment crisis for the economy.

News Desk |

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

The LCCI President Almas Hyder, Senior Vice President Khawaja Shahzad Nasir and Vice President Faheem Ur Rehman Saigal said that export revenues will also be affected by the withdrawal of the zero-rated facility and this will potentially create a balance of payment crisis for the economy.

They said that the government should introduce an automatic and efficient system of refund payments whereby 75% of the refunds should be paid through the bank upon the issuance of the attested copy of bill of lading while the remaining 25% of refunds should be paid through the banks against the export proceeds after 30 days.

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

They said that government has announced withdrawal SRO 1125 under which five export-oriented sectors are exempted from sales tax and its withdrawal will add burden to the government exchequer besides badly hitting the national exports.

The LCCI office-bearers were of the view that the announcement made in the federal budget speech 2019-20 has created unrest amongst the exporters who are working in difficult circumstances but making their all-out efforts to bring much-needed foreign exchange in the country. Withdrawal will squeeze the working capital of the industry and dry out liquidity from the market.

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.

Read more: Asad directs FBR for early tax rebate to exporters

Senior FBR officials told Business Recorder that the FBR will 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, the paper said, SRO 1125(I)/2011 provides for zero-rate of sales tax on inputs and products of five export-oriented sectors.

The objective was to resolve the delay in refund payments. However, the paper said, 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, it added, saying huge misuse of SRO on import of fabric and processed fabrics has been reported.

Pakistan Readymade Garments Manufac­turers and Exporters Association Patron-in-Chief Ijaz Khokhar said the withdrawal of zero-rated regime would make their exports unviable and wipe out many small- and medium-sized exporters.

It will not Work, Business tell Minister

While talking to Dawn Zubair Motiwala, a leading Karachi-based business leader, said during recent negotiations with the government officials and minister it was clearly stated that it will not work because already two attempts were made in the past to do away with zero-rated regime, but did not work.

“At 17 percent sales tax for exporters, with a refund of 17pc as well, they can’t pay me the money they already owe me and now they are asking me to pay more? They can’t manage things at zero per cent, now they want to tax me at 17pc?,” the paper quoted Motiwala as saying.

Read more: Why Pakistan’s exports are not growing?

Pakistan Readymade Garments Manufac­turers and Exporters Association Patron-in-Chief Ijaz Khokhar said the withdrawal of zero-rated regime would make their exports unviable and wipe out many small- and medium-sized exporters.