Secretary Commerce Younas Dagha conveyed concerns on the proposed discontinuation of zero rating and made a few submissions with respect to business community to Haroon Akhtar Khan. Business Recorder had learnt two weeks ago from one of the senior most government officials that the government was contemplating withdrawal of sales tax facility from next fiscal year as revenue loss from this scheme had been calculated at Rs 15 billion. However, this information sent a negative message to the business community. Secretary Commerce raised this issue with Special Assistant to Prime Minister on Revenue.
Haroon Akhtar Khan stated that he was a key supporter of this scheme and with the support of the Prime Minister and Finance Minister it began to be implemented. He further explained that the zero-rating scheme began in 2006 but was abandoned due to the increase in refund claims and, unfortunately, the same thing was happening now. He pledged that the scheme would stay in place for the time being but the FBR has to keep a balance and would not accept a hit in its revenue collection, adding that refunds have to be come down.
The seminar was attended by heads/high-level functionaries of relevant organisations including Federal Board of Revenue, State Bank of Pakistan, National Tariff Commission and Ministries of Finance, Commerce and Textile Industry, Academia, Prominent Trade Associations, Chambers, and leading exporters who presented their viewpoints. Haroon Akhar complained to Secretary Commerce that it had been agreed with the five export oriented sectors that they would not submit claims of packaging material as input cost but the commitment was not being honoured. He claimed that FBR has paid refunds of Rs 100 billion to exporters this year as compared to Rs 79 billion last fiscal year; adding the date for payment of refunds of Rs 30 billion will be announced by the Finance Minister.
"Almost every sector is performing well. Government has given provided multiple relief to the business community but exports have not picked up," he added. According to him FBR''s revenue has increased from Rs 1900 billion to Rs 3100 billion despite the fact that inflation has declined and POL prices were kept unchanged for seven months. He maintained that FBR''s performance should not be judged after the announcement of relief to the masses, which contributes to the overall economy.
"If prices of petroleum products would have been increased vis-à-vis neighbouring countries, FBR''s revenue would have increased by Rs 600 billion," he said. Haroon Akhtar said steel sector, cement sector and auto sector are performing very well. Earlier, Secretary Commerce Younas Dagha said the objective of this seminar was to provide an opportunity to the private sector stakeholders to present their trade related proposals to the public-sector policy makers.
He revealed that majority of the budget proposals received in Ministry of Commerce related to tariff, sales tax refunds and customs rebates. Therefore, he personally took the initial set of proposals to the Chairman FBR, who agreed to favourably process all the proposals.
Dagha argued that pending Sales Tax Refunds of the exporters may be paid and a mechanism for time-bound processing of refunds may be devised. The stuck-up refunds is the single-most important reason, stated by the stakeholders, for declining exports as it is affecting the liquidity and cost of finance for the export sector. He acknowledged that Refund Payment Orders (RPOs) were recently rolled back on the grounds that the refund of sales tax on packaging material has also been claimed in violation of the understanding between the exporters and the government at the time of negotiation of PM''s Package for Exports. The RPOs may be re-approved expeditiously after deducting the disputed amount which may be settled separately.
Haroon Akhhar Khan stated that RPOs of Rs 50 billion of exporters are ready and would be cleared as per the prescribed procedure. Dagha in his speech said that presently zero-rating facility is available to only five export sectors which include Textiles ($9,362 million), Leather ($396 million), Surgical Goods ($262 million), Sports Goods ($234 million) and carpets ($74 million). However, other sectors which contribute to exports even more than the eligible sectors eg rice ($1,376 million), fish & fish preparations ($240 million),fruits ($356 million), meat & meat preparation ($212 million), chemicals ($294 million), pharmaceuticals ($588 million), cement $248 million), plastic material ($141 million) have been ignored. He suggested that all export potential sectors may be included in the zero-rating regime.
Commerce Secretary said zero rating of sales tax for the five export-oriented sectors may be allowed on all inputs including packaging material. The customs rebate on imported inputs may be adjusted at the time of receipt of remittance rather than refund, later on, as it affects the cash flows and increases the cost of doing business. During the seminar, President Rawalpindi Chamber of Commerce and Industry (RCCI) spoke on behalf of the entire business community and proposed that the government should enhance its tax-base instead of increasing rates for the current tax payers. He also suggested that the government should also attract light engineering industry of China which is relocating to other countries.
The representatives of different Associations also submitted budget proposals which included: removal of duty on import of primary raw material and machinery, increase in duty on import of finished items, abolition of regulatory duty on import of certain items, zero rating of sales tax on all inputs including packaging material, suspension of EDS for three years, withdrawal of levy of GIDC, increasing coverage of PM export package to non-textile sectors, export incentive bonus in exchange rate, clearance of refunds to improve liquidity position of the industry, opening up E-Commerce payment gateways in Pakistan etc.
Senior officials of State Bank of Pakistan, Ministry of Industries and Production, Ministry of Finance and Federal Board of Revenue (FBR) were present in the seminar. They gave instant answers to the business community about legal status of their proposals.
Copyright Business Recorder, 2017