Exporters decry delay in sales tax refunds

Say govt’s apathy pushing industries towards collapse

KARACHI:

Export-oriented industries are under extreme financial crunch and are facing losses of billions of rupees as their liquidity remains stuck due to delay in release of sales tax refunds.

“The government has stopped releasing all the sales tax refund claims whereby exporters’ precious liquidity worth billions of rupees have been stuck,” Value-Added Textile Forum Coordinator Muhammad Jawed Bilwani said at a joint press conference of value-added textile associations held at the Pakistan Hosiery Manufacturers & Exporters Association (PHMA) House.

“The prime minister, finance minister and their economic team have completely ignored the export sector, mainly the value-added textile sector, which is on the verge of collapse owing to the government’s anti-business and anti-export mindset,” he lamented.

The Federal Board of Revenue (FBR) has issued Sales Tax General Orders (STGO), which have caused further disruption in the processing of sales tax claims, without consultation with the stakeholder associations, Bilwani said.

Earlier, the exporters were happy with the functioning of the FBR’s FASTER system, which was processing claims electronically as per law and rules without any delay.

The FASTER system was introduced to end human intervention and process the sales tax claims electronically, while the new parameters introduced in the STGO involving FBR officials will defer the sales tax claims and again open the floodgates to corruption, Bilwani remarked.

According to an estimate, approximately 60% of exporters’ liquidity is lying frozen with the FBR. As a result, the textile export industry has become unviable and is on the verge of collapse.

Besides, a sharp decline in exports and foreign exchange earnings is hindering production while the country’s economic managers are not giving any heed to the repeated distress calls to save the export industries facing the most difficult times in history.

Industries continue to suffer due unavailability of gas and uninterrupted power supply, shortage of industrial inputs/ raw materials caused by restrictions on opening of Letter of Credits (LC), discontinuation of DLTL and Regionally Competitive Energy Tariff.

“The Prime Minister has no time to meet the exporters as four scheduled meetings during last four months have been postponed in a row,” he regretted.

Pakistan’s textile exports dropped significantly by 11% in February 2023 to $1.18 billion, Topline Securities textile sector analyst Nasheed Malik stated.

“The decline was primarily due to a decrease in the value-added textile exports, such as ready-made garments and knitwear that went down 13% and 18% respectively,” he added.

In terms of volume, exports of knitwear, towels, and bed-wear exports fell by 16%, 10%, and 9% respectively, whereas exports of ready-made garments increased by 15%. This decline indicates a wider deterioration in global textile demand as major textile exporting countries such as Bangladesh, China, and Vietnam have experienced similar declines.

During 8MFY23, textile exports in Pakistan amounted to $11.22 billion, indicating a YoY decline of 11.

“The major exports markets, such as the USA and Europe continue to be a concern for Pakistan’s textile sector as demand from those markets is on decline,” Malik cited.

For FY2023, we expect textile exports to be in a range of $16-17 billion as compared to the target of $25 billion.

Published in The Express Tribune, March 23^rd, 2023.

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