Delay in refunds to make matters worse for industry

Textile garment manufacturers and exporters have expressed disappointment at the performance of Federal Board of Revenue’s (FBR) refund system as it has failed to timely clear the sales tax refund claims.

“The liquidity of exporters is stuck due to the irresponsible and uncaring attitude of the authorities,” remarked Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Central Chairman Mubashar Naseer Butt at an emergency meeting of the association on Saturday.

Highlighting the financial trouble afflicting the exporters, Butt urged the government to immediately release the tax refund claims of the textile industry.

He cited the government’s commitment that the refund payment orders (RPOs) would be issued to the exporters in 24 hours, while refunds would be released within 72 hours of the issuance of RPOs.

“Practically, this commitment is not being fulfilled as 72 hours have extended to several weeks,” he pointed out. Butt asked the government to take immediate measures to arrest the slowdown in textile exports as Pakistan’s most valuable sector could collapse.

He recalled that the government had earlier created a culture of trust in the business community by paying tax refunds on time, which was appreciable, but “the situation has changed now”.

“At present, we are facing financing gaps while the authorities are not ready to give us any reason for the delay, creating trust deficit,” he regretted.

Talking to The Express Tribune, Insight Securities’ analyst Ali Asif pointed out that the textile industry was already under pressure in the current uncertain times, where export orders were dwindling due to the global recession. “Delay in sales tax refunds will only make matters worse. Therefore, the government may probably make the sales tax refund payments as the textile sector plays a pivotal role in our economy and accounts for over 60% of exports,” he said.

Echoing similar views, textile sector analyst Saad Ziker emphasised that sales tax refunds should be cleared as soon as possible because any delay would dent the liquidity of many companies, which would disturb the flow of working capital.

Also, he said, with the release of tax refunds, the companies would be able to purchase raw material and other things for the production of goods. “Release of refunds will definitely be a sigh of relief for all the exporters.”

Published in The Express Tribune, October 16^th, 2022.

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