LAHORE: Finance Secretary Naveed Kamran Baloch has assured the All Pakistan Textile Mills Association (Aptma) that a notification about gas and electricity tariffs for five major export sectors will be finalised and issued on Monday, said an Aptma official.
Speaking to The Express Tribune, he said a meeting had been scheduled for Monday, July 22, where representatives of the Ministry of Petroleum and Power would be invited to address the challenges being faced by the industry, especially those that emerged after the presentation of federal budget 2019-20.
According to minutes of a meeting held among Aptma, finance secretary, petroleum secretary and power secretary on July 18, a summary was being prepared for Sui Northern Gas Pipelines Limited regarding halting the subsidy from March 2019 onwards. It would be forwarded to the Economic Coordination Committee (ECC) for consideration and approval.
It was highlighted that clarification was being sought from the Ministry of Finance for continuing electricity supply at 7.5 cents per kilowatt hour (kWh) to the five major export sectors, which were previously zero-rated, from July 2019 onwards.
Aptma also held a meeting with Adviser to Prime Minister on Commerce Abdul Razak Dawood and Federal Board of Revenue (FBR) Chairman Shabbar Zaidi where it was decided that withholding tax on the import of machinery would be fixed at 1% as was previously applicable under SRO 1,125.
Earlier, withholding tax was being charged at a rate of 5% and clarification in that regard would be issued on July 22. The new tax refund mechanism for exporters has been drafted and the FBR will post a notification on its website to seek comments and input of the stakeholders.
“As per the new mechanism, tax refunds to exporters will be released immediately after filing tax returns,” stated minutes of the meeting.
During the meeting, Aptma expressed concern that most of the cotton production was being purchased by the industry within three months during which hefty tax refunds would get stuck and registered persons would not be able to claim or adjust them. Aptma proposed that either the sales tax on cotton should be reduced to 5% from the present 10% or payment of sales tax should be deferred till cotton consumption. “Furthermore, buyers of cotton (spinners) should be allowed to pay sales tax under special ginning rules,” it stressed.
The FBR chairman assured businessmen that the proposal would be considered. Aptma was of the view that the inadmissibility of input tax if CNIC was not provided was harsh and emphasised that it should be withdrawn.
Secondly, it demanded that 3% sales tax on unregistered persons should also be withdrawn and maintained that the sales tax on registered and unregistered persons should be the same.
“The word ‘good faith’ in case of sales to unregistered persons needs to be defined that the seller will never be prosecuted in case the CNIC is found to be fake,” Aptma said.
The demand for withdrawal of 10% sales tax and 3% additional tax on the import of machinery for both Greenfield and Brownfield projects also surfaced during the discussion.
According to the minutes, the FBR chairman assured textile millers that clarification over 1% withholding tax being applicable under SRO 1,125 would be issued on July 22.
Zaidi pointed out that initially 10% sales tax and 3% additional tax on the import of machinery would be applicable to Greenfield projects only and sales tax on machinery for Brownfield projects may not be considered at this stage. He urged Aptma to provide cases of deferred payment which were not being processed.
On the issue of providing a level playing field to the local industry and imports under exemption rules, substantial data and proper arguments were given by the Aptma delegation to ensure that domestic industry was protected, the minutes concluded.
Published in The Express Tribune, July 21st, 2019.