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News Clips 31 January, 2015

[ Non-payment of refund claims: textile sector facing serious financial crunch: Prgmea ]
[ FBR expedites clearing blocked sales tax refunds ]
[ Government urged to implement new textile policy forthwith ]
[ Textile industry to get refunds by February-end: zero-rating request rejected ]

Non-payment of refund claims: textile sector facing serious financial crunch: Prgmea   [ top ]

Business Recorder, December 03, 2014
Business Recorder, January 31, 2015 Members of Pakistan Readymade Garments Manufacturers & Exporters Association (Prgmea) have said the value-added textile sector is facing serious financial crisis, because more than Rs 205 billion of the value-added textile chain has been stuck up with the government.

PRGMEA Central Chairman Ijaz Khokhar and Vice Chairman (NZ) Malik Naseer, in a joint statement said that the Federal Board of Revenue still withholds more than Rs 13 billion under Drawback on Local Taxes and Levies (DLTL) claims and about Rs 17 billion sales tax under refund claims, causing immense problems to textile industry.

Khokhar 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 that all refunds of the exporters would be cleared by September 2014. He appealed to the government to issue instructions to the FBR for speedily releasing cheques against all the pending Sales Tax Refunds and Customs Rebate Claims to continue export earning process which is now on declining trend.

He suggested the government to restore the "No payment no refund System" for the value-added textile sector because collection of two percent sales tax and then refunding is not only an exercise in futility but involves a large number of FBR personnel and precious time of FBR which can otherwise be utilised to bring more sectors in tax net to enhance revenue.

Khokhar urged the government to allocate the export development fund to the Textile ministry so that the fund could be utilised for development of export, as textile sector's contribution to EDF stands at Rs 11.5 billion. He said that the sector's production could grow by over 80 percent if stuck up funds will be released immediately. He said that the country has failed to improve its textile exports despite getting the status of GSP Plus status. The textile export fell by six percent last month. On the other hand, India had provided full support to its textile sector, giving financial incentives and discount on the import of machinery so that the country could compete with Pakistani goods in the international markets. India gave maximum incentives to its industry after Pakistan got the status of GSP Plus status, he added.

He urged the government to increase monetary support to the ailing sector. Vice Chairman Malik Naseer said that though the FBR is releasing cheques against Refund Payment Orders (RPO) of June 30, 2014 yet the refund claims submitted after June 30, 2014, are pending while the major amount of the exporters is pending for the last five years and Finance ministry is not giving instructions for clearance of these old pending claims.

He lamented that textile exporters are battling hard for their survival in the global market in the face of severe competition from neighbouring countries and struggling to meet export commitments despite most adverse factors. He also demanded of the government to provide gas to manufacturing units at lower rates so that they could compete globally.

FBR expedites clearing blocked sales tax refunds   [ top ]

The News, January 31, 2015
KARACHI: The Federal Board of Revenue (FBR) has expedited the process of sales tax refund issuance and directed tax offices to hold meetings with business representatives to resolving their liquidity issues, official sources said on Friday.

Large taxpayer units and regional tax offices, as per their jurisdiction, will hold meetings with representatives of All Pakistan Textile Mills Associations (APTMA), Overseas Chamber of Commerce and Industry (OICCI), Pakistan Business Council and American Business Council for resolving their refund claims issues.

Chairman FBR Tariq Bajwa, at a meeting on January 23 at LTU Karachi, had issued directives to the offices of Inland Revenue for reducing the pendency of blocked refunds and ensuring smooth functioning of industrial activities.

An official at LTU Karachi said the unit has issued around three billion rupees worth refunds to textile sector since July 2014. It has pendency of one billion rupees of refunds, where no objection was marked by the online system of the FBR.

He, however, said that around Rs2.4 billion refunds of the sector were deferred. The official said business representatives would be asked to advice their members for removing objections generated by computerised refund system for smooth processing.

The official said the FBR had a cautious approach in issuing refunds due to huge revenue losses through issuance of refunds against fake and flying invoices.

The FBR identified that numerous officials of Inland Revenue were found involved in the bogus refund scam. The revenue body, taking harsh stance against corruption by its official, has already ordered removal of services in few cases.

Business community said the stuck refunds, another circular debt issue, are hampering business activities and causing loss to around 0.5 percent of the gross domestic product. According to an estimate, the FBR had pendency of around Rs165 billion refunds in both sales tax and income tax.

Industry sources said despite issuance of refund payment orders (RPOs) or cheques, the FBR was not releasing cash. They said the FBR has stopped the refunds to show off revenue collection performance.

Representative of a tax department, in a case before the Federal Tax Ombudsman, admitted that the FBR deliberately stopped the issuance of refunds to meet the revenue collection target of 2013/14 fiscal year.

Government urged to implement new textile policy forthwith   [ top ]

Business Recorder, January 29, 2015
Pakistan Textile Exporters Association (PTEA) has urged the government to implement new textile policy immediately for next five years. Textile exporters have expressed grave concern over government's delay to implement new textile policy which carries the measures to increase country's textile exports to US 26 billion dollars by 2019.

Sohail Pasha, Chairman and Rizwan Riaz Saigal, Vice Chairman of PTEA here on Wednesday revealed that government announced several schemes like complete settlement of all outstanding refund claims, rationalisation of refund regime, drawback of local taxes on 10 percent increase in annual exports, establishment of Exim Bank, duty free import of textile machinery and reduction of mark-up rate for export refinance in the budget 2014-15, but due to absence of any textile policy, the sector is not getting benefits from these schemes to improve its efficacy.

They said that funds of 80 billion rupees were earmarked in the federal budget for textile package, however, after a lapse of seven months, these schemes could not be implemented. They said that textile sector contributes about 55 percent to the country's total exports, besides providing direct and indirect millions of jobs but this sector is being run without a textile policy for last six months. They also expressed concern that after the grant of GSP Plus status, instead of increase, textile exports have showed declining trend as exports dropped by 6.38 percent in December as compared to same month of previous year.

PTEA group leader Ahmad Kamal was of the view that country has failed to take full advantage of the trade concessions under GSP Plus scheme. Previous textile policy, which ended on June 30, 2014, failed to meet the envisaged textile exports target of US 26 billion dollars, which is currently no more than US 13.5 billion dollars, he mentioned.

Textile industry to get refunds by February-end: zero-rating request rejected   [ top ]

Business Recorder, January 29, 2015
While assuring textile industry to clear pending refund claims by end-February 2015, the Federal Board of Revenue (FBR) has rejected the request of the industry for a major policy shift to restoring sales tax zero-rating facility, replacing lower sales tax rates.

Sources told Business Recorder here on Wednesday that Federal Minister for Textile Industry Abbas khan Afridi presided over a meeting on the issues of textiles sector with Federal Board of Revenue (FBR). The minister stressed that it is a national obligation to bail out textile industry from the liquidity crunch and release the stuck-up claims on priority basis as textile exports account for more than 55 percent of foreign exchange. Secretary Mintex, Chairman FBR, Member IRS and textile representatives attended the meeting.

The industry demanded zero-rating on sales tax, however the Board rejected to give immediate zero-rating facility and urged for devising a clear mechanism where exports and domestic sales could be differentiated. At present, lower rates of sales tax are applicable under SRO.1125 which had replaced sales tax zero-rating facility. When contacted, a tax official said at present there is no proposal under consideration to restore the sales tax zero-rating facility for the textile sector.

Sales tax at rate of 2 percent is applicable on import and local stage of industrial input including yarn, dyes and chemicals, 3 percent on fabrics, 5 percent on finished products and garments and 17 percent on imported garments, he added.

They said that the FBR has directed all Chief Commissioners of Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) for processing of deferred sales tax refund claims. The FBR has issued instructions to the field formations that compliance report has not been received till date on deferred claims. FBR Member (IR-Operations) has desired that all the deferred sales tax refund claims be processed and disposed of as per relevant law, rules and instructions latest by February 28, 2015. In this regard, compliance report to the effect that no refund claims older than 90 days are pending with LTU/RTO to be submitted to the Board by March 2, 2015 positively, official added.

FBR chairman Tariq Bajwa apprised the minister that RPOs worth 8 billion have already been issued for the period July, August and September. Claims worth 14 billion are classified as deferred payments on account of some deficiencies, whereas claims worth 8.2 billion have been freshly filed.

Further, all the deferred claims would be disposed of before February 28, 2015 for which necessary instructions have already been issued. Chairman highlighted that from July 2014 to January 2015, 14 billion refund claims of the textile sector have already been paid against Rs 8 billion in corresponding period of last year. He assured that the refund claims till October 2014 would be cleared before the deadline.

Representatives from the textile sector praised Textile Minister and chairman FBR for their co-operation. They highlighted that delay in payments is one of the main issue that keeps hindering their business cycle and requires immediate attention. It was agreed to make the payment procedure more swift and speedy. Minister was apprised that special excise duty has already been addressed. Minister was requested to look in to the issue of duty drawback claims that remain pending from December 2013. The Chairman assured that he will look into the matter and would inform accordingly. To further streamline the payments, the Minister invited the stakeholders to come up with recommendations on domestic and export bifurcation and directed his team to make the procedure compliant to international best practices.