Pakistani exporters fear tax refunds will remain stuck in FY21

Textile exporters have voiced fear the government will not be able to release the stuck sales tax refund claims in the new fiscal year as well because billions of rupees worth of exporters’ liquidity is still lying with the government, which has not been released earlier.

“Textile exporters are deliberating whether to continue operating the industrial units or close them down permanently,” said Pakistan Apparel Forum Chairman Jawed Bilwani. “The industry is facing extreme unrest as the government has turned a blind eye to its demand of restoring the zero-rated sales tax facility.” Major demands and recommendations of export sectors went unnoticed by the government, which was surprising and unreasonable, Bilwani said. As per past practice, the government sought budget proposals from chambers and trade associations, however, this time trade organisations were neither consulted about budget nor were their proposals incorporated into the budget, he said.

Bilwani underlined that the government launched the FASTER system for sales tax refunds without prior consultation with the stakeholders or any kind of orientation about how to operate it.

Although the government promised the release of sales tax refunds within 72 hours after data entry into the FASTER system, in the first five to six months, the system functioned below par and remained inactive.

During that time, the Federal Board of Revenue (FBR) had to process refund claims manually and the State Bank paid refunds on FBR’s advice, he said.

He emphasised that the textile export sector was the backbone of economy and provided countless employment opportunities, particularly to women and lower-class workers in garment units. “Depriving the highest foreign exchange earning sector of relief in the budget is beyond comprehension,” he lamented.

Bilwani voiced fear that the decline in textile exports would translate into loss of 60% of national exports besides closure of allied industries and big markets, which would trigger massive unemployment.

Echoing his views, Towel Manufacturers Association of Pakistan Secretary General Muzammil Hashmi said it had been six months since the industrialists last received their due tax refunds.

Exporters appreciated Inland Revenue’s former member operations Seema Shakil for having regular interaction with trade chambers for consultation and recommendation to improve the FASTER system.

“We have learnt that the government released some payments to exporters against their refund claims on June 30, which is appreciable, however, the exporters are of the view that refund payments must not be delayed,” they told The Express Tribune. “Still, a huge amount of sales tax refund is pending that will be carried forward or deferred.”

Published in The Express Tribune, July 3^rd, 2020.

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