The Finance Division, the Federal Board of Revenue (FBR) and the Commerce Division under their respective heads continued their budget preparations during the weekend along with the financial impact, to be shared during the meeting. "There are very bleak chances of any substantial relief to industry in general despite strong lobbying as the FBR which is far behind its original and revised revenue target for the outgoing fiscal year, is ready to set a revenue target of Rs 5.550 trillion as a pre-condition of the IMF program," the sources added.
The country's value added sector has decided to go on strike from Sunday (today) after their talks collapsed with the FBR. However, All Pakistan Textile Mills Association (APTMA) has agreed to pay 7.5 per cent GST on local consumption with some conditions though talks have failed.
APTMA representatives who attended the meeting with FBR told Business Recorder that the arrogance and lack of maturity of Minister for Revenue, Hammad Azhar led to failure of talks with zero rated export sectors as he refused to provide a guarantee on the refund mechanism and reduced rate.
On Saturday, a delegation of APTMA, the strongest lobby which has also very close ties with the Prime Minister, held meetings with the Prime Minister's Advisor on Commerce, Textile, Industries and Production and Investment, Abdul Razak Dawood, Minister for Revenue, Hammad Azhar, Chairman Federal Board of Revenue (FBR), Shabbar Zaidi and other "useful" contacts to minimize the impact of zero rating abolishment. Likewise, chemical sector and paper industry have also held meetings with the concerned authorities.
Insiders claim that Commerce Division has submitted some alternate tariff proposals to the FBR, after the latter rejected the former's tariff rationalization proposals on the plea that an alternate plan must also be on the table to compensate the financial loss in case relief is extended to the industry.
Prime Minister Imran Khan has also been sensitized through meetings with top guns of industry, who apprised him that with the FBR's proposed revenue plan domestic industry will be massively hurt and will not recover in the near future. Prime Minister was also apprised that with the current revenue plan exports which flat lined during 2018-19, will go down.
The representatives of each sector have extended their stays in the federal capital and are using different channels for lobbying for their industry to get maximum relief or at least avert negative impact of the budget on their industry.
According to APTMA, textile industry firmly believes that withdrawal of zero rating at this stage would be fraught with danger in so far as exports are concerned. The momentum gained of a 20 per cent quantitative increase in exports over the last nine months would be hard to maintain. However, in the interest of Pakistan's deal with International Monetary Fund (IMF), APTMA has agreed to the introduction of reduced sale tax regime subject to the following conditions: (i) continued regionally competitive energy rates of $ 6.5 cents for gas/RLNG and 7.5 cents for electricity; and (ii) new SRO to replace SRO 1125 defining indirect and direct export based industry for purposes of energy which should cover the entire sector as already agreed in various meetings.
Imposition of GST at 7.5 per cent: APTMA has proposed that imposition of 7. 5 GST will cover all imports at a standard rate. Any imports currently attracting more than 7.5 per cent GST will also be brought to the standard rate of 7.5 per cent, these will include: (i) all fibres including cotton and manmade fibre; (ii) all types of yarn; (iii) all types of grey fabrics; (iv) all types of process fabrics; (v) all types of made ups and apparels; (vi) all types of chemicals used in the manufacturer of textile and clothing products; (vii) all types of accessories; (viii) all types of packing materials; and (ix) all imports and raw materials imported under any export bond/ DTRE/ EOU schemes will be imposed 7.5 per cent of GST.
Refund of GST @ 7.5 per cent on FOB value: This will be effective from export shipments from July 1, 2019; (i) 7.5 per cent GST refund will be paid on the value of exports; (ii) it will be paid by the commercial bank at the time of submission of complete shipping documents and the concerned commercial bank will seek reimbursement from SBP of the GST refunds paid to the exporter.
"Imposition of GST is subject to the approval of above conditions and refund mechanism being notified simultaneously," said an APTMA official, adding that in case the Association's conditions are rejected then it will also join hands with other value added sectors and launch a nation-wide protest.
According to sources, the government has agreed in principle not to impose 1 per cent additional General Sales Tax (GST) on beverages and cigarettes. M/s Coca- Cola Beverages Pakistan Limited (CCI Pakistan) had conveyed to the federal government in clear words that the company will withdraw its new planned three-year investment of $ 200 million, saying that business environment is beginning to look bleak and uncertain. Likewise, Philip Morris and Pakistan Tobacco Company (PTC) also strongly opposed imposition of additional one per cent GST.
The National Tariff Commission (NTC), a body of Commerce Division, which has established a tariff cell to evaluate budget proposals from different industries is said to have submitted seven cases to the FBR for tariff rationalization.
