September 26, 2002	Thursday	Rajab 18, 1423

KARACHI, Sept 25: The Chairman All Pakistan Cloth Merchants Association, Ahmed Chinoy has apprehended that new sales tax refund rules would eliminate all commercial exporters from trade.

In a statement he cast doubt that the fresh sales tax rules would be able to do away with ‘flying invoices’ culture.

These rules were notified by the CBR through SRO 575, and were made effective from Sept 1, 2002, replacing the previous refund rules under SRO 417, and were applicable up to August 31, 2002.

Commercial exporters, constitutes about 50 per cent of total export trade, may eventually be pushed out of the business altogether.

Chinoy said the commercial or any other category of exporters could not afford to block his funds for longer period particularly when he was asked to claim refund on production of bank credit advice or submission of documents.

Chinoy said that a period of 120 days is required for shipment and only then the commercial exporters would be in a position to file his refund claims with the collectorate of Sales Tax.

This would mean that any commercial exporter would not be able to do more than two shipments as his huge funds would stay blocked with CBR for no fault of his own. This will deprive him of much needed cash flow to meet subsequent export contracts, he added.

Furthermore, no exporter could keep inventories for more than six to nine months for claiming refunds, which is not possible for any on-going business concern to oblige at any given day or time because much depends on the buyers attitude and placing of orders.

On the other hand, he said manufacturer-cum-exporter unlike in the past when they had to submit a chain of invoices for claiming refunds will now have to submit only one invoice.

Ahmed Chinoy further said that the main objective of framing new sales tax refund rules was to check ‘flying invoices’ but apprehended that CBR would not achieve this goal even under new rules.

He said even under new rules unscrupulous exporters will tend to buy ‘flying invoices’ at cheaper rates and thereafter, make claims at original value of GST invoice.

Ultimately, he said the government will again be getting lesser in sales tax (revenue) and would be paying more towards refund as had been in the past.

It is unfortunate, he said, the government had been doing experiments after experiments for enhancing revenue collection through sales tax regime but it failed to find out the real fault.

Ahmed Chinoy said that time and again the business community had been advising the CBR that it should forget the IMF conditionalities and start the GST from fixed scheme and gradually expand the same after completely documenting the economy and increasing literacy rate.

“If any scheme is a success in the West it does not mean that the same could be applied in third world or developing countries and achieve similar goals,” he added.