LAHORE, Feb 26: Pakistan Textile Exporters Association (PTEA) has rejected the Federal Board of Revenue (FBR) move of extending the imposition of withholding tax on all companies and exporters at one-fifth on the applicable rate of sales tax on all purchases as it would affect exports.

PTEA vice-chairman Mohammad Asif said in a statement on Tuesday that the move would not only increase the financial cost of businesses, but would also be hitting their cash flows as SRO was issued without any prior notice or with the consultation of business community.

According to SRO 98(1)72013 issued on Feb 14, 2013, all companies as defined under the Income Tax Ordinance 2001, registered for sales tax, FED or income tax, would be subjected to withholding tax at one-fifth of the applicable rate of sales tax on all purchases.

Furthermore, persons registered as exporters would also to be subjected to withholding tax of one-fifth of the applicable rate of sales tax on all purchases from registered persons. Asif said that the move was purely a revenue generation measure as the FBR was struggling to achieve its highly ambitious target of Rs2,381 billion.

The FBR has collected Rs1,027 billion in the first six months of the current fiscal year and now it has to collect Rs1,163 billion to achieve target of Rs2,190 billion in the second half of the fiscal year.

He said that such changes would not add revenue to the government exchequer rather they would create hardship for smooth running of businesses that were already suffering from liquidity crunch.