Reformed GST : Zero-rated sectors threaten strike

Industrialists say documentation an excuse to repeal zero-rating, areas already fully documented

ISLAMABAD: Industrialists from the five zero-rated sectors have threatened to go on strike if the reformed general sales tax (RGST) is imposed.

Sales of the five sectors, which include textile, leather, surgical instruments, sports goods and carpets will be subject to the proposed rate of 15 per cent under the RGST. Industrialists will be able to claim refunds on export sales from the Federal Board of Revenue (FBR).

The decision was announced by representatives from each industry and chambers of commerce at a press conference in Islamabad on Thursday. However, the representatives did not present a united front and the decision to go on strike seemed to be made on the spot.

The industrialists said if the RGST is imposed, they will shut down their industry and relocate to other countries. They pointed out that the government cannot be expected to attract foreign investment when it is having trouble retaining domestic investors.

The representatives of these industries argued that the government should increase tax collection by taxing those which are not in the tax net instead of increasing the burden on those already paying their taxes.

They added that if the purpose of the RGST is to document the economy then the government should use National Identity Cards along with National Tax Numbers to track individuals who are beyond the threshold for income tax and then tax them accordingly.

The industrialists said that documentation was only an excuse to repeal the zero-rating of these sectors since these areas were already fully documented.

They added that the FBR has been unable to pay the sectors Rs50 billion in refund right now and it is difficult to see how it will be able to pay Rs150 billion in refunds that will be due under the RGST. Collecting taxes and then refunding them was a pointless exercise, they also said.

Industrialists and traders were not taken into confidence when the RGST bill was being drafted, they said, refuting the government’s earlier claim that all concerned parties had been taken on board.

Published in The Express Tribune, December 3^rd, 2010.