Pakistan Hosiery Manufacturers & Exporters Association's (PHMEA) Central chairman Chaudhry Salamat Ali has demanded the government to restore Zero Rating on Sales Tax – No Payment No Refund Regime reinstating SRO 1125 in the budget terming it indispensable to surmount liquidity hardships of exports and in the national interest to enhance exports and earn foreign exchange to strengthen the economy.
Due to global business slowdown and Covid-19, he pointed out that the economy of Pakistan is also in dire straits and the current volume of exports cannot be unsurpassed unless the burning liquidity problem being faced by exporters is not appropriately addressed by the government.
To achieve a great milestone in enhancement and development of exports, it is crucial that the government must facilitate the export sector introducing export-friendly policy as the five export oriented sectors have been highly aggrieved due to rescinding SRO 1125 and imposition of 17 percent sales tax on exports which government imposed in the last budget with a view to collect sales tax on domestic sales of textiles. This unilateral move by the govt penalized the export sector as their precious liquidity in shape of sales tax refund was held unreasonably with government, which also caused disruption in enhancement of exports.
PHMA (Central) chairman voiced that the global economic slowdown has also
adversely affected the export sector of Pakistan. To dampen the effects of Covid-19, deserving support and attention of the government to the export oriented sectors is inevitable. The Textile exporters have already faced colossal financial losses during global lockdown which has brought damages to their businesses. Now that the global business activities have started moving towards normalization, many buyers have changed the term of payments and demand 120 days for payment.
How export industries will survive in these circumstances when buyers need 120 days for payments along with 17 percent sales tax which is refunded after excessive delays? In present difficult times during lockdown, export industries are operating under capacity, the situation demands immediate deserving considerations as textile export industry will face another challenge of further increase of cost of manufacturing due to production below capacity which cannot be afforded by SME Exporters and such situation may compel for closure.
Chaudhry Salamat Ali articulated that textile exporters who had timely filed their claims of sales tax refunds had received only 35 percent of their pending sales tax refund with the government. However, 65 percent of sales tax refunds are carried forward and still pending which cumulate approx. 12 percent to 15 percent amount of exporter's running capital. Textile Exporters even filing on time sales tax refund claims started receiving refunds after passage of seven months' time while after nine months only 75 percent exporters have received their refunds and 25 percent refund have not yet been released by FBR.
The textile exporters do business on a very narrow margin and they can apply for refund only after export of consignment. Hence, the financial hardships of export industries have multiplied mainly due to imposition of 17 percent sales tax.
Therefore, PHMA strongly demands the government to accord priority and facilitate the five export oriented sectors and their complete supply chain encompassing its allied industry to enhance export efficiency and avoid decline in exports with revival of SRO 1125 and restoration zero rating of sales tax “No Payment No Refund Regime" in the national interest.