LAHORE, June 29: One of the two viscose staple fibre (VSF) manufacturers the government ostensibly seeks to protect through the imposition of 10pc federal excise duty on the import of and the sale of the locally-produced viscose is closed.

The other plant is operating at only 10pc of its rated capacity.

Sources in the textile industry told Dawn on Friday that Chemi-Viscose, with rated capacity of 10 tons per day is located in the Sindh Industrial Zone in Nawabshah, was closed for quite a while. By virtue of its location, Chemi-Viscose’s production is exempt from excise duty.

On the other hand, the other viscose manufacturing plant – Rehmat Wazeer – is located in Sheikhupura and is producing merely 20 tons of viscose per day against its rated capacity of 200 tons. Both the plants are old technologies, according to the textile industry sources.

“The government has imposed excise duty just to give protection to Chemi-Viscose, which is located in an industrial area that has been exempt from the levy excise duty,” an official of Aptma told Dawn.

He said Rehmat Wazeer would attract excise duty on the clearance of VSF.

The Central Board of Revenue (CBR) has imposed 10pc excise duty on imported as well as sale of locally-produced VSF. This is in addition to the 5pc import duty on its import value.

The industry imported about 30,000 tons of viscose last year when the international market was around $1.65 per kg. As the international market has jumped up to $2.65 per kg, its import is likely to slip.

The import of viscose staple fibre is allowed under the Duty and Tax Remission for Export (DTRE) scheme. In addition, the duty drawback on viscose staple fibre products is also admissible. But the rates of drawback have not been adjusted to reflect the new international prices for two years.

“It is interesting to note that the CBR has imposed excise duty without consultation with any stakeholder after the announcement of the budget. Why wasn’t the imposition of federal excise on VSF not announced in the budget is anybody’s guess,” the Aptma official said.

The textile industry claims that the current duty structure on viscose chain after the levy of excise on the import of and the sale of locally-produced viscose has become such that it encourages import of viscose yarn instead of its local manufacturing.

“It may be noted that total duty on VSF has now been jacked up to 15pc as it already attracted 5pc customs duty. On the other hand, the import of viscose yarn attracts only 7pc customs duty as the recently imposed excise duty is not applicable on it, which supports our point that the new tax on VSF will discourage local production of viscose yarn” the Aptma official said.

He said viscose fabric attracted 15pc and viscose garments 25pc customs duty.

Aptma has already objected to the imposition of federal excise duty on VSF import and sale of locally-produced viscose. Its chairman Shafqat Elahi said the industry had no objection to the desire of the CBR to protect the manufacturing of a local industry. But, he added, it must not be done at the cost of the spinning industry.

He said the measure would discourage diversification of the textile products.

“The imposition of excise duty amounting to Rs480 million will affect the spinning units heavily. A polyester/viscose-blended yarn spinning mill of 20,000 spindles will be liable to pay additional Rs31 million per annum. A 100pc viscose yarn spinning mill of the same capacity will be liable to pay an extra Rs90 million annually,” he said.

He said the spinning industry was already going through one of its worst crisis. The new step would create further problems for it, he added.