Uniform ST rate on fabrics criticised

Updated October 10, 2013

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- File Photo
- File Photo

KARACHI: The value-added textile sector is critical of the Federal Board of Revenue (FBR) for imposing three per cent uniform rate of sales tax on all fabrics.

No distinction has been made between finished and raw fabric.

In a joint statement on Wednesday, the leaders of value- added textile sector said for domestic consumption they may endure three per cent sales tax.

However, sales tax should be two per cent on finished fabric meant for export of garments.

They stated that two per cent sales tax is already being charged on the entire chain, starting from yarn purchase to dyeing to other stages by exporters.

These leaders expressed their dismay over the situation and said when the Federal Board of Revenue (FBR) earlier tried to impose three per cent tax on all categories of fabrics, it failed because at that time PML (N) was sitting in the opposition and opposed the move.

They found it surprising that now in government, the PML (N) had initiated a move it knows will hurt the business.

They further added that huge outstanding amounts towards sales tax refund, customs rebate, FED and DLTL claims are causing severe liquidity crunch and exporters are unable to meet their future export contracts.

The higher sales tax would mean greater liquidity crunch.

They stated that sale of finished fabric to manufacturer-cum-exporter be charged at 2pc and the status of value-added textile export sector’s zero-rated status be maintained so that hassle of refund is eliminated which also promotes corruption.

The leaders who jointly issued the statement include Dr Miza Ikhtiar Baig, chairman, Pakistan Denim Manufacturers & Exporters Association, Irfan Z Bawany, chairman, Pakistan Hosiery Manufacturers and Exporters Association, Khwaja Mohammad Usman, chairman, Pakistan Cotton Fashion Apparel Manufacturers and Exporters Association, M Jawed Bilwani, chairman, Pakistan Apparel Forum, Kamran Chandna, chairman, Pakistan Knitwear and Sweater Exporters Association and Arshad Aziz, chairman, Readymade Garments Manufacturers and Exporters Association.