Pakistan textile sector demands restoration of zero-rating regime

Pakistan textile sector demanding restoration of the zero-rating regime, the decision to withdraw zero-rating has adversely affected exports at a time when huge amount of Sales Tax Refunds are already stuck up with the Federal Board of Revenue (FBR) and exporters are facing liquidity crunch.

The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Senior VC Jawwad Ahmad Chaudhry has advised the government and the FBR to announce export-friendly policies instead of creating difficulties for the industry.

In a letter sent to Federal Secretary Textile Industry Rukhsana Shah, the industry representatives said that the government may study export policies of India, China and Bangladesh where exporters are facilitated through export-friendly policies, saying that FBR should announce export friendly policies instead of creating difficulties for the industry.

Due to the energy shortfall, a major chunk of their finances is diverted to develop energy infrastructure like wood and coal boilers that squeeze their financial streams, said Chaudhry. This has been intensified by the delay in refund of sales tax and suspension of research and development payments. There are several cases in the manual system of refund that are yet to be handed back and in CREST it takes around four to five months for refunds.

Chaudhry said that the export volume of Pakistan’s apparel products can be increased from the existing $8 billion if the government takes all stakeholders on board and finalises export policies after consultations.

He condemned revision of the zero-rating scheme at a time when the country has a trade gap of $21.27 billion, as during last fiscal year total exports of Pakistan were $23.641billion against total imports of $44.92 billion.

This huge trade gap has resulted in inflation and the devaluation of the Pakistani rupee. The withdrawal of zero-rating from the textile, leather, carpets, sports, and surgical good sectors will adversely affect the exports.

He stressed at export-friendly policies to stop the flight of capital and save the industry.

Also the energy crisis has terribly hampered industrial growth, creating several implications including slowing down GDP growth and forcing industries to relocate contributing to massive un-employment, disparities and industrial default rate. The energy shortfall has also diverted foreign investment away from Pakistan.

To recover from the crisis, the government has to take concrete measures for un-interrupted supply of electricity and gas to the apparel industry and to all its supporting sectors.