Value-added Textile Sector Demands Revival of Zero-rating Regime

KARACHI: On Thursday, textile exporters requested the government to reinstate the zero-rating regime for five export-oriented sectors, claiming that ongoing economic uncertainty and unresolved refund claims had put them in danger of going out of business.

At a press conference, value-added textile associations demanded that the government reinstate the GST No-Payment, No-Refund System that was previously governed by SRO-1125 at the Pakistan Hosiery Manufacturers and Exporters Association (PHMA) House in Karachi.

“Textile exporters are highly perturbed over excessive and unjustified delays in GST refunds against approved Electronic Refund Payment Orders (ERPOs) claims,” officials from The Pakistan Knitwear and Sweaters Exporters Association, Pakistan Apparel Forum, and other organizations stated.

To timely release the refunds, they continued, the Federal Board of Revenue (FBR) was in violation of GST regulations.

“According to an estimate, the stuck-up sales tax refund claims amount comes to around Rs300 billion,” the joint pressure said.

The value-added textile exporters were concerned and incensed about how the government would uphold its promise to timely refunds, which have accumulated to billions of rupees stuck up with the government, in light of an uncalled-for response from the FBR, they said.

They explained that under the current system of sales taxes, value-added textile exporters pay sales tax when buying industrial inputs for goods destined for export, which they do so, and such goods are stored in warehouses.

It typically takes three to four months to complete and ship an export shipment. Exporters submit claims for sales tax refunds after shipment, and these are eventually approved.

According to the exporters, this method results in a cumulative sales tax amount of 40 to 50 percent.

The associations claimed that despite approaching Islamabad’s top brass about the issue of the stuck refunds, they did not receive a positive response.

They cautioned that if the zero-rating system was not reinstated, the government would be held accountable for industry closures, capital flight, and extreme unemployment, none of which would be in the national interest.

A large number of textile exporters have reported to their respective trade associations that they have recently experienced inconvenience and excessive delays in the payment of sales tax refund claims under the FASTER system that were filed in the month of August 2022. However, their e-RPOs were generated, approved, and released from October 16, 2022, to November 23, 2022, but payment against the approved refund claims has not been released in the specified timeline.

Reports claim that the FBR is holding up billions of rupees in sales tax from textile exporters across the nation. As a result, the exporters are experiencing extreme financial hardship and are unable to obtain raw materials or inputs needed to produce goods for export.

Reference: https://www.thenews.com.pk/print/1013444-value-added-textile-sector-demands-revival-of-zero-rating-regime