Senate body recommends continuation of zero-rating regime for export sectors

ISLAMABAD: Senate’s Standing Committee on Finance has recommended the National Assembly to continue with the zero-rating regime for five export-oriented sectors in the Finance Bill 2019.

The finance committee meeting, which was presided over by Senator Farooq H Naek, resumed its discussion on the Finance Bill 2019 on Wednesday. Representatives of various sectors of the economy turned up in the committee to express their concerns.

The committee was in unanimity that five zero-rated sectors were the backbone of the exports and preferential treatment must continue to them so as to increase the volume of exports and thereby to deal with the problem of trade deficit.

However, the Federal Board of Revenue (FBR) contention was of the view that the department was prepared and willing to sincerely deal with their primary problem of refund even at upfront level but “their local sales must be brought into the standard rate of sales tax”.

The representative of zero-rated export sectors, Zubair Motiwala, informed the committee that the government would trigger inward smuggling of cloth from Afghanistan by implementing 17pc sales tax even at the local stage.

On this, FBR Chairman Shabbar Zaidi maintained that the government would soon take up the issue of smuggling with the Afghan president and if he was unable to plug it, the government would be open to review its decision with regard to sales tax on the local sale.

Zaidi stated that the basic issue of exporters was their refund payment, adding that the government was ready to sit with them to devise a mechanism for payment of refunds at the export stage.

He said that the government has also made sale tax registration automated to facilitate the businesses.

The shipbreaking industry representatives said that the industry should be charged Federal Excise Duty (FED) at 70pc weight of the ship instead of 100pc, which was proposed in the Finance Bill 2019.

The committee recommended the National Assembly that 85 per cent weight of the ship – both for input and output – should be taken for FED.

Fertiliser dealers also expressed their reservations over the increase in turnover tax from 0.5 per cent to 0.7 per cent in Finance Bill 2019. However, the FBR representatives stated that such steps were difficult to take but they were important in order to achieve the challenging revenue collection target for the next fiscal year.

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