TAHIR AMIN

ISLAMABAD: Textile value added sector has proposed the government to drastically reduce sales tax (ST) from 17 percent to 3 percent, withholding tax (WHT) from 5.5 percent to 1 percent, clear all pending claims of exporters, reduce cost of doing business / energy cost and abolish export development fund on exports in the upcoming budget 2018-19.

According to the budget proposals of Pakistan Hosiery Manufacturers and Exporters Association (PHMA) submitted to the Textile Division, customs duty is charged when exporters buy raw material. Time period of other activities is as follows: 4 months manufacturing period, 6 months realization time and 12 months for refund of customs rebate. This implies that exporters get payment after almost 22 months or more (if refunds are not further delayed by FBR) despite the fact that exports are affected long back and keeping the payment of customs rebates outstanding causes great amount of hardships and severe liquidity crunch to the exporters.

It is recommended that all pending claims of customs rebate to be cleared. It is proposed that in future, all customs rebate claims to be settled and paid through State Bank of Pakistan at the time of realization and payment of export proceeds. This proposal is not only workable but the most pragmatic because now form is being done electronically. This should also be done efficiently as impact of customs rebate is below 1 percent of total amount.

All stitching units and/or any other single unit of value chain (knitting/ weaving/ dyeing/ printing) are manufacturers-cum-exporters registered with Ministry of Textile Industry (Mintex) and the ministry has complete relevant details of textile units which can surely be ascertained from the ministry and, therefore, there is no question of any misuse.

The PHMA requested that permission for import of yarn and other raw materials to the stitching units and/or any other single unit of value chain (either knitting/ weaving/ dyeing/ printing) for garment manufacturing meant for export under the DTRE Scheme be allowed to Mintex license holders (exporters) whose license is renewed after every two years.

It is also requested that stitching units or any other single unit also to be allowed under the rules and procedures of DTRE scheme to outsource any certain percentage of work involved in manufacturing of goods meant for export.

All textile units should submit application to Mintex for permission of all imports under DTRE where the Mintex shall approve the application and send information copy to the FBR. This will also lessen the workload of FBR as the entire responsibility will fall on Mintex. This will also help the MINTEX compiling comprehensive database of textile industry and maintain complete documentation in this regard.

There should be no restrictions on import of items which can be got through courier by Mintex License holder exporters directly on the approval of Ministry of Textile Industry. This Mintex license renews after every two years.

“We also propose that it is most practical that a separate cell be established under Appraisement Department only for import of restricted accessories required by the exporters for manufacturing goods meant for export. All textile units should submit application to Mintex for permission of all imports of accessories which should be approved by FBR. This will also lessen the workload of FBR as the entire responsibility will fall on Mintex,” it was proposed.

The association further proposed whenever the govt desires to impose regulatory duty on import of cotton yarn, it should also impose the same on export of cotton yarn and there should be time limit / duration of imposition of duty.

The government should look into the ways of reducing cost of doing business / energy cost for the spinners and bring them at par with cotton producing countries because cotton (raw material) is available in international markets at the same rate.

As the govt has abolished duty on cotton import, it should also abolish duty on import of cotton waste. This will support enhancing the value added textile exports.

It is proposed that sustainability related equipment including Effluent Treatment Plants (ETP) and Wastewater Treatment Plants (WTP) and their parts including filters and membranes, should be allowed to be imported duty free under SRO 809.

The ETP and WTP should be included in SRO 809 and SRO 809 be extended till Dec 2019. Sales Tax percentage should be revised from 17 percent to 3 percent and withholding income tax to be revised from 5.5 percent to 1 percent.

Faisalabad exporters are also facing water problems for their RO plants and recycling plants, and therefore, it is proposed that govt should provide community-based ETP.

It is, therefore, proposed for amendment reproduced below for the consideration of the Board by enhancing supplies for indirect exports from 20 percent to 30 percent.

i) At least 80 percent of its production to other countries [inclusive of up to 30 percent supplies for exports against securities to the satisfaction of collector concerned or up to 30 percent supplies for local consumption on payment of leviable duties and taxes], if established before 1st July 2007;

(ii) 100 percent of its production to other countries [inclusive of up to 30 percent supplies for exports against securities to the satisfaction of collector concerned or up to 30 percent supplies for local consumption on payment of leviable duties and taxes,] if established on or after 1st July, 2007, and licensed by the Collector of Customs under rule 3;

Although zero rating has been continued under SRO but we strongly believe that this zero rating should be converted / transformed into an Act from existing SRO system. This would boost the confidence of the stakeholders of our nation.

It is imperative that all outstanding claims of the exporters are cleared as per Sales Tax and Refund Rules.

The FBR should inform the exporters by which date their pending refund claims will be cleared.

The PHMA proposed that all such claims should be cleared forthwith. Refunds of sales tax on packing material be decided at a fixed percentage basis and be refunded along with exports proceeds through SBP as the entire exercise is now being done electronically. “As per our calculation, 1 percent of export value on garments and home textile and 0.50 percent of export value on dyed fabric should be allowed as refund which will save FBR’s precious time that will be able to work on broadening the tax net.”

Exporters fall under final tax regime u/s 143(b) and should be exempted from payment of WHT and be given exemption certificates. As per PHMA calculation, share of WHT is 0.25 percent of total exports. This will greatly benefit them and also lower workload on FBR who are busy in a futile exercise. They will be getting more time to focus on broadening of tax base which is dire need of the time.

It is imperative that govt should broaden the tax net by imposing sales tax on retail stage as govt can generate revenue of billions of rupees. To determine the sales made by a retailer shop, a limit of Rs 50,000 or more of amount of electricity bill should be set and it should be made mandatory for them to provide NTN so that such persons are brought into the tax net. They should be given a notice period of two months to get registered and obtain NTN, failing which electricity connection should be disconnected. After 100 percent achievement to bring category of Rs 50,000 in the tax net, this amount may be gradually reduced to Rs 45,000 and similarly lower to bring more persons in tax net. This step will motivate them to use electricity frugally.

The PHMA proposed a token tax rate of 3 percent which will have no financial impact on retailer as the end user (consumer) will be paying this 3 percent tax (e.g. on an item purchased valued Rs100 the purchaser will have to pay Rs 103 out of which only Rs 3 will be sales tax which the retailer will collect and pay to the government.

It is better that exporters be exempted from payment of WWF and they allowed to use the amount for labour related compliance matters which will directly benefit for the welfare of workers engaged in the manufacturing process and will help enhancing exporters as the compliance level / standard of local companies will increase.

The PHMA proposed that EDF on exports must be abolished and a trade development surcharge be levied on imported luxury items such as cars, soap, shampoo, cosmetics, etc,/ finished goods. This would also help PHMA exporters in using the cash liquidity for enhancement of the exports of our nation.

The association proposed that at least 80 percent of the cost of all certifications and foreign lab testing should be reimbursed by the government as past practice. This amount may be paid out from export development fund which is recovered from exporters.

The PHMA proposed that the government should consider clearing / releasing the duty drawback claims / DLTL claims within one week of submissions. Top priority be given to export oriented industries in the supply of all utilities 24/7 365 days to run the industries without the least interruption and be separate status.

Tariff also needs to be rationalized and brought at par with regional competing countries to give level playing field to PHMA exporters. The PHMA proposed that the water tariff should be uniform in comparison to other provinces.