The Pakistan Textile Exporters Association (PTEA) has raised serious concerns about prolonged delays in the disbursement of refunds totaling Rs328.5 billion, which have caused severe liquidity issues and disrupted operations in the textile sector. Despite repeated assurances from the government, exporters are still awaiting refunds, resulting in financial strain and hampering the sector’s potential for growth.
The breakdown of outstanding refunds shows that Rs55 billion is withheld under sales tax refunds, Rs105 billion under deferred sales tax refunds, Rs25 billion under duty drawback, and Rs100 billion under income tax refunds.
Additionally, Rs35.5 billion remains pending under Drawback of Local Taxes and Levies (DLTL/DDT), with Rs4.5 billion under Technology Upgradation Fund (TUF) and Rs3.5 billion under markup subsidies.
According to the PTEA, the delays have exacerbated liquidity constraints, preventing exporters from expanding their operations and covering rising financial costs. The association emphasized that the high-interest burden on pending payments has compounded the challenges for businesses in a sector that serves as a major contributor to Pakistan’s foreign exchange reserves.
The PTEA pointed out that the Sales Tax Act 2006 mandates refunds to be processed within 72 hours. However, refund cycles have stretched to over 200 days, far from the promised timelines.
For instance, in September 2024, refunds were only issued against RPOs (Refund Payment Orders) up to August 11, while October 2024 payments only covered RPOs through August 25. As of October 30, non-faster refunds have only been cleared till September 30, 2024.
Further aggravating the situation, the budget allocation for DLTL/DDT refunds was only Rs10 billion, against the approved liability of Rs38 billion. Exporters argue that the underfunded refund framework restricts reinvestment, stifles growth, and weakens their ability to compete internationally.
The textile sector, a critical driver of Pakistan’s economy, reported a 15% month-on-month growth since August 2024, with an export surplus of $7-8 billion. However, PTEA warned that the government’s failure to resolve these refund delays threatens to undermine future growth.
The association clarified that it is not seeking subsidies or special treatment but rather the fulfillment of the government’s financial obligations. It urged the authorities to expedite the disbursement process to restore the sector’s financial stability and unlock its potential to achieve double-digit growth in exports.
PTEA’s statement highlights the urgent need for swift government action to support the textile sector, which plays a pivotal role in stabilizing Pakistan’s trade balance. Accelerating the refund process, the association argued, would signal the government’s commitment to fostering a business-friendly environment and restore exporters’ confidence in economic governance.
