LAHORE, June 13: The textile industry has apprehended an increase in the cost of doing business and high inflation due to various budgetary measures introduced for the fiscal year 2013-14.

“The textile industry cannot sustain and export inflation,” said an All Pakistan Textile Mills Association (Aptma) spokesman on Thursday.

The federal budget for 2013-14 has added another two per cent as tax on supplies to unregistered persons, which would encourage reintroduction of fake registrations and flying invoices, the spokesman said.

The FBR had withdrawn the zero rating regime for textile industry after due deliberations and reduced the rate to two per cent irrespective of supplies to registered or unregistered persons within the five zero rated sectors. The addition of two per cent further tax would again create an arbitrage alluring tax officials and fake companies to register temporarily to do business of flying or fake invoices.

In its pre-budget discourse with the industry, the FBR had removed the difference in rate of tax between the registered and unregistered to check the fake flying invoices phenomenon, the spokesman recalled and added that the budget speech presented a picture entirely different from what the FBR and the industry had agreed upon.

Further tax on supplies would increase the cost of doing business for the industry, making textile products unacceptable in the international market. Already exposed to unprecedented gas and electricity shortage, the industry has been losing almost 50 per cent of production capacity.

The federal budget, said the spokesman, provided legal backing to the CREST for verification of input tax of the textile industry supply chain. “This system is already causing discrepancies in industry sales due to technical hitches leading to unnecessary notices and harassment. The FBR should improve the CREST system to overcome discrepancies to avoid undue hardships to taxpayers.

“Also, the FBR has disallowed input tax adjustment in a situation when refunds of billions of rupees of the textile industry are already stuck up with the system,” said the spokesman and urged the federal finance minister to issue direction to the FBR to liquidate all pending refunds of sales tax, income tax and customs, enabling the industry to meet liquidity requirements.

“Similarly, increase in the turnover tax from 0.5 per cent to one per cent is likely to add to the income tax refunds, already fast eroding viability of industry. The rate of initial depreciation reduction from 50 per cent to 25 per cent for plant and machinery is likely to discourage further investment, which is necessary for achieving economic growth,” said the spokesman.

PTEA: The federal government has not addressed in the new budget the problems hurting exporters, says the Pakistan Textile Exporters Association (PTEA). “Budget makers have failed to give direction to the industrial progress, trading activity, cost of doing business and competitiveness of Pakistani goods in the international market,” said PTEA chairman Asghar Ali and vice-chairman Muhammad Asif in a statement here on Thursday.

The PTEA leaders said the national budget was expected to give a direction to manufacturing, business and trade of the country “but no attention has been paid to national economy and architects of the budget have failed to realise the importance of major irritations besetting the economy and outline a strategy for their solution”.

They expressed satisfaction with allocation of Rs225 billion to overcome the energy crisis and demanded more funds for this purpose. Yet another setback to the industry is increase in the cost of doing business. The industry would be hit hard by the soaring prices of supplies and ancillary goods, which have been subjected to higher GST rate of 17 per cent and withdrawal of subsidies on various inputs. Price hike in supply items would create a chain effect of increases and ultimately put a burden on cost of industrial production, making Pakistani goods uncompetitive, they argued.