Pakistan is facing a foreign trade deficit of about $19 billion and the value-added textile export sector is the backbone of Pakistan’s economy. PHOTO: FILE
KARACHI: Exporters have voiced fear that textile shipments cannot be stepped up as they face a liquidity crunch in the wake of delay in release of tax refund claims by the government.
The Federal Board of Revenue (FBR) is liable to pay around Rs45 billion in Duty Drawback of Taxes (DDT) and Drawback of Local Taxes and Levies (DLTL) for the period January 2017 to August 2018, said Pakistan Hosiery Manufacturers and Exporters Association (PHMA) Central Chairman Muhammad Jawed Bilwani.
The revenue collecting body was also supposed to release Rs40 billion in sales tax refunds, Rs6 billion in customs rebate and over Rs1 billion in withholding tax refund, he said.
“It is not returning back our money, which is preventing us from moving forward,” he lamented. “If it releases the refunds on time, the textile industry can be enlarged by up to 10% next year.”
He added that the delay in releasing tax refunds was causing immense sufferings to the already burdened exporters. “Such an alarming situation will ruin the export business of value-added textile exporters,” Bilwani said. “The government has still not provided any firm commitment to release the said claims.”
The previous government released Rs32.18 billion in DDT under the PM Export Package and in DLTL under the textile policies of 2009-14 and 2014-19 while the current administration “has not released a single rupee so far,” Bilwani said.
“The government has been in office for more than four months now, yet it is only paying lip service and no practical steps and measures have been taken to resolve the matter,” he argued.
“Pakistan is facing a foreign trade deficit of about $19 billion and value-added textile exports are the backbone of the country’s economy. It earns foreign exchange and revenue - both in bulk - for the government.”
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Besides, the sector is also labour-intensive and the largest employment generator.
However, value-added textile exporters were battling for their survival in the global market due to costly inputs and high cost of manufacturing. To address the challenges, provide an enabling business environment and create a level playing field, “it is crucial that the government immediately release DDT and DLTL refund claims,” Bilwani said.
In a separate statement, All Pakistan Textile Mills Association (Aptma) Chairman Syed Ali Ahsan urged Finance Minister Asad Umar to give directives to the FBR for processing and releasing outstanding sales tax refund claims of the industry in order to address serious liquidity issues plaguing the manufacturers and exporters.
He pointed out that over Rs100 billion was outstanding in sales tax refunds of the textile industry, both on account of current and deferred refunds, at various Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) mainly due to cross-matching of invoices and payment of sales tax on account of services since 2008 onwards.
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He asked the FBR to immediately give directives to all LTUs and RTOs for expeditious processing of refund claims and subsequent payments against the Refund Payment Orders (RPOs) in order to save the industry from being declared a defaulter.
“Banks are already reluctant to revise credit limits for companies as per increased cotton rates. This means further pressure on liquidity, making it difficult for the mills to stay afloat, he added.
Published in The Express Tribune, December 27th, 2018.
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