Traders have urged the government to waive the 37% tax applicable on partially-oriented yarn (POY) to encourage establishment of draw textured yarn (DTY) manufacturing units.
In a statement on Monday, FPCCI Yarn Trade Committee Convener Khawar Noorani requested the government to end the 37% tax applicable on partially-oriented yarn citing that it was a basic raw material for the textile industry and small and medium units.
He was of the view that elimination of the duty would encourage investors to set up DTY manufacturing plants after which local production would match the raw materials requirement of domestic industries.
Noorani expressed serious concerns over tax rate on POY and DTY being equal.
He pointed out that DTY could be produced from POY, which made the latter a raw material.
Breaking down the numbers, he said that 11% customs duty was applicable on import of POY along with 2% additional customs duty, 2% income tax, 2.5% regulatory duty, 17% sales tax and 3% additional sales tax, which totalled to a tax rate of 37%.
"The tax rate on DTY is also 37%, which is completely unfair because duty on POY is lower than DTY all over the world," he said.
The official added that only two plants in Pakistan produced DTY and met 20% of the total demand while imports covered the remaining 80% demand of the industries.
He added that the two domestic manufacturers utilised PTA (purified terephthalic acid) and MEG (mono ethylene glycol) to produced DTY.
The official highlighted that the two local producers took advance payments from factories and were not in a position to fulfil country's total DTY demand owing to capacity issues.
Noorani pointed out that price of the commodity around the world was on a downward trajectory while it remained expensive in Pakistan.
"As a result, the production costs of local manufacturers are rising significantly with each passing day and the domestic industry is losing its ability to compete in the international market," he said.
Noorani urged the government to promote establishment of DTY manufacturing plants in the country which was only possible after abolishing the 37% tax levied on the import of POY.
He said that such a move would lead to inauguration of new DTY plants and availability of cheap raw material for the textile industry and SMEs.
"This will not only create vast employment opportunities but also enable the country to export draw textured yarn," he said.
Published in The Express Tribune, August 18th, 2020.
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