This was stated by group leader APTMA Gohar Ejaz while talking to Business Recorder. Senate and National Assembly would meet on July 10 and industry stakeholders want to register their protest with parliamentarians therefore the date has been changed, Ijaz added.
He said Prime Minister Nawaz Sharif announced incentives worth Rs 180 billion on January 10, 2017 in a bid to boost country's falling exports. An increase in exports was not a condition for access to incentives in the current fiscal year 2017 however after releasing Rs 1 billion the government informed the exporters that they must increase exports first if they are to avail of the PM's package of incentives which, in turn, would be extended after one year. This, he added, has created resentment and trust deficit amongst exporters. The government should have released around Rs 40 billion by now instead of the paltry Rs 1 billion, Ejaz stated.
The government, he added, has earmarked only Rs 4 billion in the budget 2017-18 for the incentive package which is a big joke in the industry, said APTMA representative, adding the government should take practical measures to implement the package. He identified an overvalued rupee and high cost of doing business as major factors contributing to the continued slide in exports.
Ejaz urged the government to implement the PM package in letter and spirit, clear outstanding refunds and bring the energy prices to levels comparable with other regional countries. Due to high input cost including electricity and gas Pakistan's textiles are not competitive in the international market. Electricity is available at Rs 11/kwh for the industry in Pakistan compared to Rs 7/kwh in other regional countries including Bangladesh, said Ejaz, adding that industry is burdened with Rs 3.63/kWh surcharge on electricity and GIDC on gas which cannot be passed onto the international buyers.
Further, RLNG is available at Rs 1000/MMBTU in Pakistan against Rs 400 in Bangladesh. In such circumstances the industry can not compete in the international market which accounts for exports on a declining trajectory.
Exporters have submitted claims of Rs 11 billion against different incentives under the PM package; however the government has released only Rs 1 billion so far. This has resulted in creating panic among the exporters, said APTMA official, adding they are facing serious liquidity crunch and unable to further invest in product diversification.
Textile Ministry officials said the government announced four major incentives for the textile sector under the PM package including: (i) drawbacks available to garments at 7 percent, made-ups at 6 percent, processed fabrics at 5 percent and yarn and greige fabric at 4 percent; (ii) bringing custom duty and sale tax to zero rate on cotton import; (iii) zero rate sale tax on machinery import; and (iv) abolishing customs duty on man-made fiber other than polyester.
Under the drawbacks facilities, exporters submitted verified claims of Rs 4 billion, while the government released Rs 1 billion so far. A request has been sent to Finance Ministry for release of more funds to accommodate exporters' claims. The sales tax zero-rating for five export sectors caused a revenue loss of Rs 39 billion during 2016-17. According to the Federal Board of Revenue's (FBR) estimates for 2017-18, the FBR will generate Rs 2.3 billion by raising sales tax on textile, leather, sports, carpet and surgical sectors and Rs 2.4 billion through commercial imports of fabrics in next fiscal year. In budget 2017-18, the government has increased the sales tax rates on domestic sales of textile, leather, carpets, sports goods and surgical goods from five to six per cent. Further, six per cent sales tax has been imposed on imports of clothes and fabrics.
Last May, industry claimed that the FBR had blocked Rs 100 billion sales tax refunds and rolled back Refund Payment Order (RPOs) claims by the textile sector filed from tax period July 1, 2016 onwards. On the other hand, FBR sources maintain that the amount of RPOs rolled back is not more than Rs 3-4 billion. The RPOs would be eventually reprocessed and verified under the new exercise being carried out by the field formations, but the textile industry termed it 'a technique to delay all sales tax refunds payments in 2016-17'.
Copyright Business Recorder, 2017