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Five Export Sectors’ Bodies To Meet PM To Resist Zero-Rating Facility Removal

Zero-rating regime suspension may drop export further to $21b, fears the joint body


LAHORE– The five export-oriented manufacturers’ bodies, mainly based in Sialkot, have urged the government to continue the sales tax zero-rating regime in the budget 2019-20, fearing the Pakistan export might drop further to $21 billion from existing $23.7 billion.

The five zero-rated exporters’ bodies of value-added textiles, leather, carpets, surgical instruments and sports goods, in an emergency called meeting, hosted by the Pakistan Readymade Garments Manufacturers and Exporters Association with its Chief Coordinator in the chair Ijaz Khokhar, have shown great apprehensions on the consideration of withdrawal of zero-rated regime by the finance ministry.

It said it would have adverse effect on PM Policy to generate 10,000,000 employment in the country.

The meeting was largely attended by the exporters of the Sialkot, representing over $2.5 billion export share, besides Sialkot Chamber of Commerce & Industry President Kh Masood, Surgical Instrument Manufacturers & Exporters Association of Pakistan (SIMAP) senior vice chairman Zeshan Tariq, Pakistan Sports Goods Manufacturers & Exporters Association chairman Ch Muhammad Arshad, Pakistan Leather Garments Manufacturers & Exporters Association (PLGMEA) ex-chairman Nadim Abbas, Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) former Senior Vice-Chairman Sheikh Luqman Amin and Pakistan Hosiery Manufacturers, Exporters Association (PHMA) ex-chairman Dr Khurram Anwar Khawaja and Pakistan Gloves Manufacturers  & Exporters Association ex-chairman Mohammad Younas.

Addressing the meeting, PRGMEA chief coordinator Ijaz Khokhar, observed that the textile exports from the country have already witnessed a flat growth at $11.1 billion in the first 10 months of the current fiscal year, though the value-added garment sector showed some improvement owing to the positive measures of commerce ministry, which is now being reversed by the finance ministry to generate interest-free liquidity of Rs2,000 billion at the cost of plummeting exports.

All the exporting bodies, on this occasion, unanimously decided to have a meeting with the PM, intimating him that at this stage if this facility is withdrawn the businesses will be collapsed, as they are hardly being sustained.

In the meeting with the PM, they will appeal for continuity of sales tax zero-rating facility to five export-oriented sectors in the forthcoming federal budget, as the government’s plan to withdraw the facility will have a tremendous impact on the growth and development of the Pakistan export industry.

PRGMEA chief coordinator said that the withdrawal of zero-rating will hit the export industry especially the struggling SME sector, which is the base of Sialkot industry, and from across the country as a whole contributes more than 97 percent to total export share of $23.7 billion.

He said the exporters are already facing crucial circumstances like hike in raw material prices due to dollar speculations, with rates of cotton yarn going up by more than 20 percent during the last six weeks, abolishing the impression that the exporters are benefitting the dollar-rupee parity.

Additionally, the transportation cost for the sea and air shipment has also gone up, as the companies also charge in dollar-rupee parity, he added.

Ijaz Khokhar stated that the zero-rating regime was removed twice in the past but could not prove to be successful due to sales tax refund issues.

Why it is being reconsidered third time by the finance ministry when refunds of over Rs200 billion are already pending for the last many years?, he questioned.

He criticized the Federal Board of Revenue’s proposal to suspend this facility, arguing the zero-rating of tax had reduced the work load of the FBR, sparing the export sector trouble of waiting for refunds.

He said that the FBR wants to end the facility just to make its balance sheet correct. The balance sheet might show enhanced revenue collection but the industry would be collapsed if the ‘no tax no refund’ system is withdrawn, which is already not being implemented properly,” he added.— PRESS RELEASE