Withholding tax may be raised: Textiles export proceeds
By Mubarak Zeb Khan
ISLAMABAD, May 27: The Federal Textile Board (FTB) on Friday proposed zero-rating of sales tax on the whole chain of textile-related products along with the raising of withholding tax rate on the textile export proceeds. Officials told Dawn on Friday that the FTB headed by Textile Industry Minister Mushtaq Ali Cheema proposed the zero rating scheme on supply of textile goods and services for export-oriented industries to be considered in the upcoming budget of 2005-06.
If the scheme was announced in the forthcoming budget it would cause a revenue loss of over Rs2 billion under the sales tax head. To bridge this revenue loss, the FTB had proposed to increase the withholding tax by 0.25 per cent to 0.75 per cent on the textile export proceeds as against the current levy of 0.5 per cent withholding tax. It was estimated that this increase in the withholding tax rate would generate revenue of around Rs1.3 billion.
According to the officials, the meeting also proposed to levy less than 5 per cent sales tax on retail stage on the textile-related products to raise maximum revenue from this sector. This would also help to bring more retailers under the tax net, the officials added.
The meeting was attended by newly-appointed secretary of textile industry, representatives of the relevant ministries, chambers, exporters association, cotton commissioner and textile commissioner.
The FTB observed that the zero-rating of textile chain would help both the private sector and central board of revenue (CBR) to concentrate on the expansion and improving the quality of the products. The board also recommended to the budget makers to reduce the customs duty to five per cent on the auto part used in the textile machinery. The government had already exempted textile machinery from customs duty last year.
According to the officials, the board also proposed to allow the power generation industries to sell it to other industries from the next fiscal year. The government should also announce a package for the up-gradation of the whole chain of the textile industries for keeping balance in all sectors.
The FTB proposed to reduce customs duty to 20 per cent from 25 per cent on import of power generator above 1100 kv. Up to 1100 kv power generators were manufactured locally.
It was also decided to constitute an engineering committee, which would help the textile industry in up-gradation and improvement of the efficiencies of their working. The meeting was told that government would encourage the value addition but surplus yarn and cotton would also be exported as per government policy. For the fast trading of containers from dry ports to sea ports, the number of trains would be increased, which would result in reducing the freight cost.
