While over Rs 100 billion sales tax refunds are yet to be paid to exporters, the government has announced that at least Rs 30 billion would soon be released. Finance Minister Ishaq Dar will make an announcement regarding the tax refund shortly. This was said by Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan while addressing a pre-budget seminar on “Budget for Export Growth” organised by the ministry of commerce here on Tuesday.
The seminar was attended by heads/high-level functionaries of relevant organisations including the Federal Board of Revenue, State Bank of Pakistan, National Tariff Commission and Ministries of Finance, Commerce and Textile Industry, Academia, Prominent Trade Associations, Chambers, and leading exporters.
Haroon Akhtar said the government will introduce automatic payment system of tax refunds through banks to avoid delays in payments in the future.
He also announced that the zero-rating facility on export sectors will remain intact in the near future and rumours about the withdrawal of the facility was not true. Earlier, it was reported in media that the government is likely to withdraw sales tax zero-rating facility granted to five export-oriented sectors in federal budget 2017-18 as revenue loss has been calculated at Rs 15 billion during the last nine months (July-March) of the current fiscal year. The government had issued revised sales tax zero-rating regime for five export-oriented sectors, i.e. textile, leather, carpets, surgical and sports goods from July 1, 2016 under which 5 per cent sales tax is chargeable on supplies of locally-made finished articles of textile and leather products, including the finished fabrics sold to retailers or any other category.
Haroon Akhtar claimed the government will further tighten the noose around non-filers and tax avoiders.
Talking about the decline in exports, the special assistant admitted that the government, despite its all-out efforts could not improve exports. “The issue of the decline in exports has multiple reasons including both domestic and international. Pakistan is not only the country where exports have declined,” he said. He, however, also said that with the given credit of high foreign exchange reserves, skyrocketing stock market, improved law and order situation and other positive development to the government. Haroon assured the exporters for consideration of their proposals relevant to budget 2017-18 for export growth.
Earlier, addressing the seminar, Secretary Commerce Mohammad Younus Dagha said the objective of this seminar was to provide an opportunity to the private sector stakeholders to present their trade-related proposals to the public-sector policy makers. “I have personally visited the FBR, customs, and exporters in Karachi and Lahore to receive budget proposals for export growth,” he said.
He proposed that the pending Sales Tax Refunds of the export sectors may be paid and a mechanism for time-bound processing of refunds may be devised. The stuck-up refunds are the single-most important reason, stated by the stakeholders, for the decline in exports as it is affecting the liquidity and cost of finance for the export sector. Secondly, the Refund Payment Orders (RPOs) which have been recently rolled back on the grounds that the refund of sales tax on packaging material has also been claimed in violation of the understanding between the exporters and the government at the time of negotiation of PM’s Package for Exports. The RPOs may be re-approved expeditiously after deducting the disputed amount which may be settled separately.
He said presently, the zero-rating facility is available to only five export sectors which include Textiles ($9,362 million), Leather $396 million), Surgical Goods ($262 million), Sports Goods ($234 million), and Carpets ($74 million). However, other sectors which contribute to the exports even more than the eligible sectors do e.g. Rice (US$1,376 million), Fish & Fish Preparations ($240 million), Fruits ($356 million), Meat & Meat Preparation ($212 million), Chemicals ($294 million), Pharmaceuticals ($ 588 million), Cement ($ 248 million), Plastic Material ($ 141 million) have been ignored. All export potential sectors may be included in the zero-rating regime.
The zero-rating of sales tax for the five exports oriented sectors may be allowed on all inputs including packaging material, he added.
The customs rebate on imported inputs may be adjusted at the time of receipt of remittance rather than a refund, later on, as it affects the cash flows and increases the cost of doing business.
During the seminar, the exporters also submitted budget proposals which included removal of duty on import of primary raw material and machinery, increase in duty on import of finished items, abolition of regulatory duty on import of certain items, zero-rating of sales tax on all inputs including packaging material, suspension of EDS for three years, withdrawal of levy of GIDC, etc.
RCCI President Raja Ahmer Zaman urged the government that as a large number of Chinese textile units are being relocated, Pakistan should move forward to welcome them by extending required facilities to Chinese firms.
An exporter and member of the FPCCI criticised the ministry of commerce for not involving the officials of the ministry of finance in such program as proposals and meetings lose importance when the recommendations are bulldozed by the finance division.
