KARACHI: The ministry of textile industry has violated the federal cabinet decision by including textile units located in Export Processing Zones (EPZs) in the textile policy announced on Aug 12, for availing drawback on local taxes and levies, textile industry sources alleged.

Prior to the announcement of the 5-year textile policy it was put before the federal cabinet for getting proper approval, sources said.

However, the original and approved draft of the textile policy never included textile units in EPZs in the duty drawback scheme, they added.

It is a common knowledge that tax rebate in any government schemes is generally given to those textile units which are paying local taxes and levies but the units located at EPZs do not qualify for this scheme since they do not pay any of these taxes and levies, they added.

Industry sources maintained that the units located at EPZs already enjoyed a number of incentives and exemptions and do not fall under the ambit of local labour laws. Consequently, they do not pay such levies as social security, EOBI contribution, export development surcharge as well as property tax.

The sources further revealed that the State Bank had allocated separate country code to the Export Processing Zones Authority (EPZA) and its units get cheaper export finance under Libor, which is currently about one per cent lower than the local rate.

However, the ministry through a notification dated Sept 1, 2009, included textile units at EPZs under the drawback of local taxes and levies scheme. Prior to the issuance of this notification the ministry on its website never included EPZ units under this scheme but the reason in sudden change of mind is yet to be known, the sources said.

The issue was included in 12 point agenda meeting of the implementation committee of the ministry held last week. However, strong resistance was witnessed from the stakeholders belonging to tariff areas of the country, participants to the meeting told Dawn.

Sources privy to the meeting said that the representatives of different textile bodies demanded of the ministry to declare EPZ textile units ineligible for drawback scheme.

On the insistence of the participants Textile Industry Minister Rana Farooq Saeed set up a 4-member committee headed by Zubair Motiwala to sort out the issue.