ISLAMABAD: The textile industry has stepped up efforts for the restoration of its zero-rated facility withdrawn as part of the Extended Fund Facility (EFF) of the International Monetary Fund (IMF).

The zero-rated regime that provided sales tax exemptions to five export-oriented industries – textile, leather, carpets, sports and surgical goods – was withdrawn in July last year as part of the budget 2019-20 through withdrawal of erstwhile SRO 1125.

The export industry had been contesting the decision and has since been demanding its reversal claiming the new arrangement was resulting in buildup of refunds with the Federal Board of Revenue (FBR) resulting in liquidity crunch to the industry.

In a letter to Commerce Adviser Abdul Razak Dawood and other members of Economic Coordination Committee (ECC) of the Cabinet, All Pakistan Textile Mills Association (Aptma) Chairman Dr Amanullah Kassim Machiyara on Tuesday said the fundamental justification for withdrawal of SRO 1125 by the FBR was that domestic sales constituted 50 per cent of textile industry output and that somehow the industry was evading the sales tax on domestic sales of approximately $12 billion.

“This claim of the FBR has proven to be erroneous and has as such now been admitted by the FBR which now states that domestic sales of textile sector only account for 20pc of the overall value of textile production in Pakistan”, he said.

He said the government had assured the industry at the time of withdrawal of SRO 1125 that it would review the situation in six to eight months. More than nine months have now passed, and it is evident that the sales tax system was not contributing significantly to the FBR kitty.

On the other hand, the entire government, the FBR and industry were constantly holding meetings and wasting precious time and money on resolving the issue of refunds.

The Aptma chief complained that the sales tax refunds were not forthcoming as promised and unequivocal claims that payments would be made, and refunds paid within 72 hours of filing of H-forms.

“This has not happened and the sales tax claims even after filing of H-forms have remained unpaid for months on end”, he said adding the flow of quantum of refunds was in fact very tightly regulated by the Ministry of Finance and the FBR and processing of payments limited to the quantum and value pre-determined by the Ministry of Finance.

Published in Dawn, April 22nd, 2020