ISLAMABAD, May 24: The textile industry has proposed to the government to fix less than 5 per cent sales tax on retailers of textile related products having a sale above the threshold of Rs5 million to bring more retailers under the tax net. The industry has also proposed to the government to zero-rate all supply and import of raw materials and other products used in the manufacturing of the textile related products in the budget of 2005-06 to make them competitive in the international market particularly with India and China.

Talking to Dawn on Tuesday Textile Industry Minister Mushtaq Ali Cheema said that he had proposed to the government to levy less than 5 per cent sales tax at retail stage as currently a very few retailers were paying sales tax to the department due to the high rate of sales tax of 15 per cent.

The minister said that it was also under consideration to introduce a nominal flat rate of income tax for the retailers having a threshold of over Rs5 million so that the retailers did not hide their actual sales due to fear of income tax.

Replying to a question, the minister said that the retailers would be given the option to submit both sales tax and income tax under one account to the tax department to facilitate them.

The minister expressed the hope that the scheme would encourage registration of around 10 per cent of the non-registered retailers in the first year of the implementation of the scheme.

The government had already exempted the retailers, having below Rs5 million sales, from the levy of sales tax during the budget of 2004-05. Moreover, the government had also announced the flat rate of 0.75 per cent of income tax for the retailers having less than Rs5 million sales during the last year budget.

Defending his proposal, Mr Cheema said that during the last 10 years of the levy of sales tax in VAT mode on textile sector has brought ‘no tangible collection of sales tax’ from the sector; rather he said it created problems for the genuine exporters.

He said that through fake and bogus invoices unscrupulous exporters have caused loss to the national kitty by getting refunds against zero exports. He said that 85 per cent of the textile related production was meant for export purposes, which he said was zero rated of sales tax.