LAHORE: Rejecting the withdrawal of zero sales tax rating facility for different export-oriented sectors through the so-called mini-budget, businessmen have cautioned those at the helm of affairs that the step will negatively impact the national exports.

Through the mini-budget (Supplementary Finance Bill), the government has proposed to withdraw zero rating sales tax facility for exported goods without considering the far-reaching implications it will cause to the national foreign exchange earnings, says Rice Exporters Association of Pakistan chairman Ali Hussam Asghar.

In a communiqué sent to Senate chairman Sadiq Sanjrani, National Assembly Standing Committee on Finance & Revenue chairman Faizullah, Finance Minister Shaukat Tarin, Commerce Secretary Sualeh Ahmed Faruqui, Federal Board of Revenue chairman Ashfaq Ahmed, and Commerce Ministry’s Director-General Agro Kausar Zaidi, Mr Asghar says: ‘This withdrawal [sales tax input/adjustment facility] will have a devastating implication on exported goods mentioned in serial number 9 of the fifth schedule of the sales tax act, 1990.”

It seems that the proposal to omit serial number 9 of the fifth schedule has been made without considering its far-reaching implications as now only those goods will be exempted from sales tax if exported by a manufacturer, he says, pointing out that producers of agricultural products are rarely in the export business.

That means the tax exemption will stand practically withdrawn for exports of agricultural produce making the local farm products uncompetitive in the international markets, the Reap chief says.

“Rice is one of the sales tax exempt items having star export performance as during the last 5 years, the export volume of this agro-based industry remains over US $ 2 billion.

“The withdrawal of sales tax input adjustment/refund may significantly increase the cost of doing business in this sector. You may well be aware of the fact that Pakistan had cutthroat competition in this segment with regional countries, particularly India. From biryani to pulao, Pakistan and India’s shared culinary landscape is defined by basmati, distinctive long-grain rice now at the centre of the latest tussle between the bitter rivals. India has applied for an exclusive trademark that would grant it sole ownership of the basmati title in the European Union, setting off a dispute that could deal a major blow to Pakistan’s position in a vital export market.

“India is the largest rice exporter in the world, netting $6.8bn in annual earnings, with Pakistan in fourth position at $2.2bn, according to the United Nations,” Mr Asghar says in the letter. He maintains that it is quite clear that any change in the landscape of the country’s policy in the export sensitive items may backfire and hamper exports, already lagging far behind its potential. “The country is already facing a serious current account deficit and any threat to its exports may be fatal for the economy,” he warns.

“We understand, while extending this proposed amendment, the FBR and relevant authorities failed to appreciate the above-mentioned economic implications and challenges, since we have not seen any revenue impact shared by the FBR on account of this proposed amendment,” he adds, requesting that the proposed amendment should be revisited to ensure export performance and growth of this segment in the larger national interest.

Published in Dawn, January 10th, 2022