Industry rejects withdrawal of ST exemption

KARACHI, March 16: The business and industry leaders on Wednesday rejected the government decision to withdraw zero-rating of the five major export-oriented industrial sectors from the sales tax.

They lamented that the move had been taken without consulting the stakeholders and it would result in flight of capital and relocation of industry to other regional countries and create massive unemployment.

The textile industry was already passing through a crucial period with frequent increase in raw material price, hike in power and gas tariffs along with massive loadshedding thereby threatening the very existence of the industry.

Leaders of the 11 textile associations under the umbrella of Council of All Pakistan Textile Associations (Capta) in a hurriedly called meeting expressed their resentment over the sudden government move of removing the sales tax exemptions allowed to five export-oriented sectors.

The government through a presidential ordinance issued on Tuesday (March 15) has amended SRO 509(I)/2007 withdrawing zero-rating of five major export oriented industries from sales tax.

The government has also raised special excise duty from one per cent to 25 per cent, imposed 15 per cent surcharge on income tax and has withdrawn sales tax on fertilizer, tractors and pesticides.

While major opposition parties termed the move as ‘mini-budget’ but trade and industry believed it would hurt the export trade and open up flood gates of corruption and would not give desired results and revenue to the government.

Patron-in-Chief of Pakistan Bedwear Exporters Association (PBEA) Shabir Ahmed told Dawn that the government announcement was confusing and it seemed that all was done in haste.

He said it was not clear that the government had withdrawn exemption on exports of five industrial sectors or only on their local sales and if both were there it would mean that huge refund amount belonging to export trade and industry would be stuck up with the FBR as was the past practice.

Pakistan Readymade Garments Manufactures and Exporters Association (Pregmea) Chairman Javed Chinoy said that the amendment in SRO 509(I) of 2007 would create problem in the supply chain and a number of questions still remain unanswered.

Chairman Pakistan Leather Garments Manufacturers and Exporters Association (Plgmea) Fawad Ijaz Khan said the industry would have no objection over imposition of sales tax on local sales of five export oriented industrial sectors because it was being practiced all over the world.

However, he said since other categories of traders, including commercial importers and local suppliers would have to pay sales tax on imported raw material it will open up floodgates of corruption through ‘flying sales tax invoices’ as was the case in the past.

He suggested that the government should have introduced a flat rate of sales tax at retail-end on local sales of these five zero-rate sectors as being practiced at food outlets and restaurants.