KARACHI: If the value added tax (VAT) is levied on raw hides and skins, it will be impossible to document it because their suppliers are mostly butchers, traders and commission agents who are normally neither educated nor registered with the sales tax department, said the Pakistan Tanners Association (PTA) in its trade policy 2010-11 proposals on Friday.
Therefore, raw hides and skins may be exempted from VAT, it said in detailed proposals sent to the Advisory Council of the Ministry of Commerce.
“We understand that under the proposed VAT system all inputs will be subject to the tax while to the export industry VAT will be refunded. However, under this system, huge funds of PTA member exporters will be blocked,” it said.
The association requested for the continuation of the current zero-rated policy in relation to sales tax “to save the export industry from serious damage and to avoid a liquidity crunch”.
It further proposed suspension of export development surcharge of 0.25 per cent for at least three years and waiving of five per cent tariff on finished leather/crust leather to improve exports.
It also asked for an increase in subsidies for trade delegations from the present $100 per day to at least $200 per day. Furthermore, an increase in subsidies from 50 per cent to 75 per cent on space rent and cost of construction for participation in international fairs was also demanded.
“We should be given at least 6.3 per cent duty drawback on export of finished leather so that we can have to some extent a level-playing field in competing with India, China and Bangladesh,” the association said.
The PTA said that to discourage export of raw hides and skins and wet blue leather, current export duty of 20 per cent should be enhanced to 50 per cent.
The association suggested that implementation of the previous trade policy, particularly the Strategic Trade Policy Framework (STPF 2009-12), should be assessed in a special committee.
It stressed that it is important to assess previous achievements because the incentives announced for the leather sector in the trade policy for 2009-10 have not yet been implemented.
It suggested that five industries including leather and related articles, textile and textile articles, carpets, sports goods and surgical goods may form a joint committee to prepare a relief package and recommend to the commerce ministry for some basic and common incentives, particularly in view of VAT being levied after three months.
Published in The Express Tribune, June, 26th, 2010.