ISLAMABAD, Sept 1: The Central Board of Revenue has nullified the impact of zero rating of sales tax on a large number of textile inputs by issuing various notifications and clarifications that created serious cash flow problems for textile exporters during the last two months.

Pakistan Textile Exporters Association (PTEA) Chairman Faiq Jawed stated this in a letter addressed to the CBR member sales tax and the textile industry minister, seeking amendments to these SROs for resolving the problems of genuine exporters.

According to the letter, a copy of which was made available to Dawn, the PTEA chairman said that these notifications and clarifications, recently issued by the CBR regarding stocks of exporters, refund on consumption of stocks and reconciliation of refund payments already made in respect of stocks, had created problems for the textile exporters.

The CBR issued notification SRO415 of 2005 on May 12, letters No-3(7)STL&P/03 on May 15 and 7(9)/STL&P/03 on August 3, 2005 regarding various issues of the textile industry.

The association claimed that these clarifications were either technically flawed or extremely harsh, imposing impossible conditions — that the exporters must export all their existing stocks up to September 30, 2005.

Mr Jawed said that most serious problem had been created by the clarification of August 2005. He said this clarification was technically flawed. “It basically directs the collectors to allow zero rating on actual exports, and subsequently allow refund on exports only. Secondly, it disallows any adjustment or refunds on the stocks held by the exporters. The immediate result of this has been almost complete stoppage of refund payments in Faisalabad,” he added.

The PTEA chairman said the CBR had also issued directions to the collectors through another clarification issued on July 15, 2005 that the exporters must export their entire stocks by the end of September positively otherwise adjustment and refund would be refused on remaining stocks.

“This is contrary to the provisions of SRO538 of 2005 issued on June 6, 2005, which did not put any condition. Likewise, the CBR, through rule 7 sub-rule 2(a) of SRO 575 of 2002 issued on August 31, 2002, allowed the exporters to hold stocks,” the PTEA chairman said.

Mr Jawed further said that even the condition of holding of stocks under SRO575 of 2002 was completely lifted by super session of SRO820 of 2004 issued on October 1, 2004, and the exporters were allowed to maintain their stocks without any limit. The condition to export entire stocks up to September 30 was impracticable and unrealistic, he added.

The PTEA chairman pointed out that the July 15 clarification had further instructed the collectors for complete reconciliation of refunds already made to the exporters on unconsumed stocks with the exports made by them, and if some stocks have not been consumed and exported, the amount so paid should be recovered or adjusted from the refund claims of the exporters.

“This in fact means in many cases — that the exporters will be immediately punished for a crime they have not committed or are yet to commit,” he said.

Mr Jawed urged the CBR to either withdraw or suitably amend the clarifications issued during the last few months so that the exporters could get maximum benefits under SRO526 of 2005 issued in the last budget.