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APTMA Punjab Chief Urges Govt To Restore Zero-Rating

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LAHORE– The All Pakistan Textile Mills Association (APTMA) Punjab Chairman Adil Bashir has urged the Federal government to restore zero-rating and reinstate SRO 1125 to enable the industry to deal with the issue of liquidity crunch in the prevailing crisis like situation.

He said the textile industry being the backbone of the country’s economy with more than 60% of the country’s export and largest employer of skilled and unskilled manpower deserves to be treated fairly to enable it to compete with the other regional competitors.

In the wake of 64% plunge in the export of textile products in April 2020, and this trend is likely to continue in the months ahead. Besides, he said, the plummeted  domestic sales to the lowest ebb due to adverse effects of COVID19, there is an urgent need to mitigate cash liquidity issues of textile industry by reforming the existing regressive sales tax refund system.

Chairman APTMA Punjab said that at the time of he withdrawal of zero-rating the FBR had committed to sanction refund claims through the newly introduced FASTER software within the 72 hours with no human interaction.

Annexure-H which is basically a statement of consumption inputs, was declared to be treated as a refund claim. Despite repeated updating in the system, still has many snags like non-catering for additional sales tax at 3%, non-provision for Section 8B of the Sales Tax Act 1990, requirement of mentioning of HS Code in eight digits etc.

These infirmities of the system seriously hampered its functioning causing inordinate delays in filing of claims. Acknowledging fatal flaws in the systems, FBR has been repeatedly extending the date of filing of Annexure-H which has now been extended to June 2020 for the period of July 2019 onwards. Due to systematic problems, the system has been severely shut as also admitted by FBR before National Assembly Standing Committees.

He stressed that legal lacunas and systematic snags like Section 8b, and additional tax may be removed in consultation with the export-oriented sectors.

In order to speed up payment of sales tax refunds, he said, the Annexure-H may be simplified requiring only two digits Customs chapter heading.

In additions to the systematic problems in FASTER and Annexure H, he said, there are fundamental conceptual errors as well. In an integrated value-added chain like textile, he pointed out, the collection of tax at the exorbitant rate of 17% at each and every stage and possibility of refund only after export of end product results in piling up of funds of billions of rupees for an extended period. Such situations create serious liquidity issues, he asserted.

He said refund or input tax adjustment is admissible from the date of purchase globally, and is not conditioned with actual consumption as it costs heavily due to blockage of funds for long period from the period of procurement of inputs to actual consumption and exports from the country.

He has further proposed that 80% of the refund amounts claimed in sales tax return may be provisionally paid against a revolving indemnity bond to the corporate units without linking it with filing of Annexure-H as was allowed previously to LTU taxpayers. The remaining 20% of the claimed refund amount may be retained till filing and processing of  Annexure-H. It will be helpful for the export-oriented sectors to deal with the challenges of slow economic recovery due to spread of Coronavirus.

He said the tax free procurement and mobility of raw materials and intermediary goods from one registered person to another in the whole value-added chain may be allowed  subject to satisfying FBR about actual consumption of inputs in exported goods.

According to him, the Sales Tax refund may be linked with purchase as in case of input tax adjustment and not with the actual consumption which entails heavy financial cost due to a longer period involved in consumption.

He said the business outlook post-COVID-19 is bleak and current Sales Tax mechanism of Faster is no longer workable. Under these circumstances, it is not possible to expect the whole value chain of textile industry to keep on paying Sales Tax in the absence of cash flow.

He, therefore, appealed to the Prime Minister to personally intervene in the matter and direct the Finance Ministry for immediate restoration of zero-rating regime for textile sector in the Federal Budget 2020-21.— PRESS RELEASE