FAISALABAD, May 22: The All Pakistan Cloth Exporters Association (APCEA) has demanded reduction in import tariff of raw material for export goods, abolition of sales tax on raw cotton , cut in sales tax rates to 10 per cent, removal of additional three per cent sales tax and continuation of SRO410 and DTRE regime.

Talking to reporters here on Friday, APCEA chief Ahmad Kamal said that high rate of import tariff on raw material was causing price hike of cotton yarn and polyester yarn in domestic market.

He said that import tariff on polyester fibre, polyester chips and chemical dyes (especially caustic soda) was over protected by excise duty on custom stages. This tariff should be reduced to facilitate availability of cheaper raw material, he added.

Pointing out hassle in DTRE scheme, he said that the exporters of value-added and finished goods were regularly buying imported raw materials for use in their madeup exportable items and garments from the local market. These items are an essential component of the exportable goods and their smooth inflow is imperative for manufacturing and finishing of exportable goods, he said.

The APCEA chief pointed out that the DTRE scheme envisaged non-payment of duties from initial to last stage. But the importers from whom they are buying raw material components had paid their duties on these items and are not prepared to go through the exercise of filing returns and claiming refund in lengthy complicated duty drawback and tax refund regime.

Hence the suppliers are not prepared to sell their goods without duties and tax. It is, therefore, not practically possible for the exporters to avail the benefits of DTRE, he added.

"Hence it was important that SRO 410 be continued simultaneously with DTRE until improvements in DTRE for smooth flow of export of vale-added finished garments," he said. He demanded that duty on import of machinery and spare parts should be abolished to sustain competitiveness of Pakistani exports in the international market.

Commenting on the recent price hike of cotton yarn, the APCEA chief said that More than 85 per cent of the cotton produced in the country was exported in one form or other. On the purchase of this seasonal product, huge funds of exporters/manufacturers remain blocked for a long time (i.e. from purchase of raw material to the export of finished goods stage), causing liquidity crunch to exporters.

Mr Kamal also demanded that sales tax on raw cotton be removed to facilitate the manufacturers/exporters and save them from hassles of refund regime. He said that prevailing rates of sales tax were quite high resulting in increase in cost production and making Pakistani exports uncompetitive.

APCEA chief demanded that sales tax rate be reduced to 10 per cent. He said that the practice of making sales to unregistered persons with further three per cent tax and evading condition of section 73 of sales tax act, is main cause of fake/flying invoice business. He said that additional sales tax of three per cent might be abolished as there was no additional tax for sales to unregistered of spun yarn. "Same course should be extended to whole textile chain."

He said that the sales tax refund system might be based on profiling so that the established genuine exporters might be able to get their refund within 72 hours without going through the formality of audit system. "The audit in such cases could be carried out later on if so required.

The APCEA chief was of the opinion that sales tax act is in fact adopted from the British value-added tax (VAT), which allows adjustment of input sales tax paid on all purchases except cars. However, the CBR vide SRO 578/(1)/98 dated June 12, 1998 has disallowed a whole range of items leaving only a handful items of small value on which input tax can be claimed. Items on which input tax cannot be claimed include vehicles, building materials, office equipment, furniture, fixtures and furnishings, telecommunication equipments, generators and generating sets, crockery, cutlery and utensils, supply of food, and POL products, he added.