Pakistani value-added textile sector in immense problem as Rs 205 bn refund claims stuck up with FBR

Pakistan value-added textile sector hamstrung by cash crunch as more than Rs 205 billion refunds has been stuck up with the government. Federal Board of Revenue (FBR) still withholds more than Rs 13 billion under Drawback on Local Taxes and Levies (DLTL) claims and about Rs 17 billion sales taxes under refund claims, causing immense problems to the textile industry, according to Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA).

PRGMEA central chairman Ijaz Khokhar and vice chairman north zone Malik Naseer in a joint statement said that millions of rupees refunds of ST and Customs rebates payable to the exporters have been held up despite firm assurance by the government all refunds of the exporters would be cleared by September 2014.

He appealed to government to issue instructions to FBR for speedily releasing cheques against all the pending Sales Tax refunds and Customs rebate claims. He suggested government to restore ‘No payment no refund’ system for value-added textile sector because collection of 2 percent Sales Tax and then refunding was not only an exercise in vainness but involved a large number of FBR personnel and precious time of FBR.

The government has been urged to allocate the Export Development Fund to Textile Ministry so the Fund could be utilized for development of export, as textile sector’s contribution to EDF stood at Rs 11.5 billion.

Though FBR was releasing cheques against refund payment orders of June 30, 2014 yet the refund claims submitted after June 30, 2014 were pending and major amount of exporters is pending for last five years as FBR has not received instruction from finance ministry to clear old pending claims.

Despite for Generalised System of Preferences plus status from European Union, the country has failed to improve its textile exports.

The textile export has plunged by six percent last month. India had provided full support to its textile sector, giving financial incentives and discount on the import of machinery so the country could compete with Pakistani goods in the international market.