KARACHI: The five export-oriented industrial sectors of the country have appealed to Prime Minister Imran Khan to intervene for continuation of the zero-rating of sales tax for the uplift of exports.
“Discontinuation of zero-rated status will result in ruin and disaster of export-oriented industries, flight of capital, mass unemployment and huge foreign exchange losses,” said the chairmen of the five industrial sectors during a joint press conference at the Karachi Press Club on Monday.
The five sectors are value added textile, sports goods, surgical, leather and carpet.
The chairmen stated that the concerned high-ups in Islamabad were not realising the gravity of the situation and sensitivity of the matter and were stubborn to implement the dictates of the International Monetary Fund.
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“Pakistan is a sovereign country and the government should accord top priority to national interest,” they said, expressing deep concern over their genuine arguments and justification at different occasions with government officials falling on deaf ears.
“We have categorically refused to accept the government's new tax regime to discontinue zero rating whereby exporters liquidity will get stuck up like in the past as no successive governments have kept their promises and cleared the backlog of exporters refund claims worth billions of rupees in shape of sales tax, withholding tax etc and we shall not deviate from our principle demand to continue zero rating,” they maintained.
They said discontinuation would also lead to corruption in connivance with unscrupulous elements in the Federal Board of Revenue under the mode of flying invoices, over invoicing, frauds in refunds etc.
“Further, due to significant volumes of liquidity being stuck in the form of sales tax refunds, export growth will be severely affected and we will witness a decline in exports,” they said. “More than Rs200 billion of exporters in refunds of sales tax, customs rebate, withholding tax and DLTL & DDT are already held up with the government.”
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They also conveyed serious apprehension on proposed abolition of Final Tax Regime (FTR) for exporters.
The chairmen, representatives and workers of the companies belonging to the five export sectors staged a peaceful protest at the Karachi Press Club against the government’s intent to discontinue zero-rating on the dictates of IMF.
The five zero-rated sectors contribute 70% of the total nation's exports and generate 50% of total nation's employment.
They said the government’s claims that it would refund in two months was based on ignorance as it took minimum six months to manufacture from yarn to garment, which means that the accumulated refund time would go beyond eight months.
“It is on record that no government during the past three decades was able to give refunds on time,” they added.
“Collecting sales tax and then refunding is a futile exercise which creates hassles for exporters and also opens flood gates of corruption,” they said, adding that no collection and no refund of sales tax from five-zero rated export sectors was a tried and tested formula for increasing revenue and exports.
They warned that the government's attempt to collect interest-free money in shape of sales tax would put the country's export at stake. “Today, in this period of worst economic crisis, can we afford to do away with zero-rated status for the five export oriented industries?” they questioned.
They cautioned that if the zero-rating scheme was discontinued, 30% of the export would decline in the first year.
They urged the government to broaden the tax base rather than burdening the existing taxpayers and documented sectors of the economy.