LAHORE: The revival of zero-rating (no tax, no refund) regime for textiles and clothing exports appears to have buoyed the country’s largest industry.
This will help the industry competitive in the international market provided the decision is enforced in letter and spirit, said former chairman of All Pakistan Textile Mills Association (Aptma) Gohar Ejaz.
“We expect the (government’s) definition of zero-rating regime for exports also includes hassle-free refund of all local taxes and levies which constitute almost 9 per cent of the textile and clothing export turnover, to revive the viability of the industry. New investments in the textile industry largely depend on formulation of a mechanism for hassle-free payment of local taxes and levies,” he added.
Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) leader Ijaz Khokhar agreed with him.
“The zero-rating of textile and clothing exports will help us recover the market we have lost,” the garment exporter from Sialkot said.
“But if the government wants exports to grow and take advantage of trade concessions allowed by the European Union under its GSP+ system, then our policy-makers will have to go a step further and release all taxes and duty refunds to ease the liquidity crunch facing the industry,” he added.
Pakistan’s textile and clothing exports have been under pressure for the last three years because of rising cost of doing business.
The textile and clothing exports from the country plunged by just below 8pc to $10.41 billion in the first 10 months of the outgoing fiscal to April from a year ago.
Besides zero-rating exports of the five manufactured exports — textiles, leather, carpets, surgical instruments and sports goods, the budget proposes to allocate a sum of Rs6bn to execute the three-year trade policy framework, continue the Drawback of Local Taxes (DLTL) scheme, cut interest rate on Export Refinance Facility to 3pc, set up Technology Up-gradation Fund (TUF).
The zero-rating facility will be available on the purchase of raw materials, intermediate goods and energy — electricity, gas, furnace oil and coal. It also promises to pay all sales tax refunds pending till 30 April and whose RPOs have been approved by August 31.
To further enhance competitiveness of the textile exports, the budget proposes to extend exemption of duty on import of machinery and widen the scope of the scheme to include more garment specific machinery.
Former chairman of the Pakis-tan Hosiery Manufacturers Association (PHMA) Shahzad Azam Khan welcomed the measures to boost textile exports from the country, but added the government should have announced tax holidays for new domestic investments in this sector.
“Frankly speaking I don’t see people making new investments in the textile sector, at least for now, unless the government allows certain tax and other tangible incentives for the new projects.”
Khurram Mukhtar, former chairman of the Faisalabad-based Pakistan Textile Exporters Association (PTEA), described the measures suggested to revive the industry’s viability and boost textile and clothing exports as historical.
“The zero-rating of our exports, reduction in ERF and payment of our tax and other refunds will definitely help the industry grow, boost exports and woo new capital investment,” he said.
Published in Dawn, June 4th, 2016