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News Clips 03 April, 2014

[ Physically verifying ST zero-rating on gas, electricity: survey of exporters'' manufacturing premises launched ]
[ Textile trade through another lens ]
[ Stakeholders urge Indian traders to reevaluate deal > ]

Physically verifying ST zero-rating on gas, electricity: survey of exporters'' manufacturing premises launched   [ top ]

Business Recorder, 03 April 2014
The Federal Board of Revenue (FBR) on Wednesday launched a national survey of manufacturing premises of exporters in textile, leather, surgical, carpets and sports industries to physically verify sales tax zero-rating on electricity and gas connections. 

In this regard, the FBR has issued instructions to all Chief Commissioners of Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to physically verify each and every registered exporter of the mentioned sectors enjoying sales tax zero-rating facility. 

According to the sources, the physical survey has been launched across the country to check the misuse of sales tax zero-rating facility on supply of electricity and gas bills by the authorised registered persons/un-authorised (registered) persons. 

The FBR''s instructions said that the Board granted zero-rating facility on supply of electricity and gas to various registered persons, who are required to fully comply with the provisions as laid down under SRO 283(1)12011 dated April 1, 2011 and SRO. 1125(1)/2011 dated December 31, 2011. It has been observed that certain instances have come to the notice of the Board where the registered persons availing the zero-rating facility on gas and electricity have become non-entitled/ineligible due to one or more of the following reasons: 

1. The lease of the premises, where the zero-rated meters were installed, has expired. 

2. The registered person has sold out the premises to some other persons not entitled to zero-rating under this regime. 

3. The registered person has shifted the business premises where zero-rated energy meters were installed to some other location. 

4. The registered person is null, nil or non-filer but availing zero-rating facility on supply of gas and electricity. 

5. The registered person has closed down his business but still availing zero-rating facility on supply of gas and electricity. 

In this regard, the FBR has directed the field formations to conduct a survey for physical verification of all the authorised registered persons as well as other unauthorised persons availing zero-rating facilities on electricity and gas on account of above parameters with a view to check misuse of the zero-rating regime and recovering the revenue in the case of defaulters, availing zero-rating beyond authorised use as well as those availing un-authorisedly. 

The FBR said that similarly an exercise may also be carried out to examine if the excess zero-rating facility has been availed by the registered persons from the date of their becoming ineligible till the date of withdrawal of the facility by the Board either on their own request or on the recommendation of field formation, and action be taken accordingly for recovery of revenues. 

It is further requested that a fortnightly report in this behalf may be submitted to the Board as per the following format: Name of registered person; NTN/STRN; energy meters/reference numbers; STGO No & S.No; status; action taken/proposed and recovery made. 

Inland Revenue fears huge losses on exemptions to export sector    [ top ]

Business Recorder, 03 April 2014
The government anticipates an increase in export earnings from the textile sector during the current fiscal year after the grant of the GSP plus status to Pakistan by the European Union. Is concentrating on the traditional US and EU market enough? As leading players like Bangladesh have total garment exports of around $22.50 billion last year, in just these two markets alone.

Almost more than 60 percent of our exports are to the traditional markets; US, EU and Middle East. The brands and buyers in the traditional markets impose harsh conditions often on the textile manufacturers and exporters, and at the same time they bargain for cutting prices of products as the countrys export depends only on the US and EU markets.

"It is amazing that Pakistani textile exporters have never truly entered into African markets in an institutionalized manner," says Majyd Aziz, former Chairman of Karachi Press Club. "It is the mindset of exporters to focus on EU markets. We have neglected the African market and just concentrated in North America and EU.

He further asserts: "We are exporting around $4.5 billion to US. It has never given us a GSP status. It focuses on IMF loans and supplying arms and ammunition but never given any economic benefits such as free market access to boost our textile exports. There is tremendous opportunity to survey the African market and to do textile business like other rice exporters and pharmaceutical companies have done."

Aziz also adds that by limiting to two markets we are not branching out and not creating economies of scale to reap benefits to our industry and country.

If there is an increase in the volume of exports to the new markets, the bargaining capacity of manufacturers on prices will rise while the sector will get relief from the reliance on the traditional market.

According to Ibrahim Mahmood, PRGMEA senior research analyst: "In traditional markets like Germany and US, we know who the buyers are and have a payment guarantee, whereas when moving to new markets like Africa we have to take blind leap of faith by getting to know the new buyers and experimenting with the assurance that they will be able to make full payments."

With granting MFN status to India being postponed there is a need to ensure sustainable textile business by reducing the reliance on traditional markets. With the present market there are sufficient orders in eight months but if exporters can seek new markets in Latin America and South Africa, same flow of orders will persist throughout the year as when there is winter in the US, the summer season prevails in Latin Americas and South Africa.

It falls essentially on policymakers to engage in serious diplomatic efforts to explore untapped markets. To seize the new markets, the government-to-government negotiation is a must, to help maintain the higher export growth. The market diversification will benefit manufacturers to reduce dependence on selected traditional markets and it will also increase the bargaining power in setting textile product prices. 

Stakeholders urge Indian traders to reevaluate deal   [ top ]

The News, 03 April 2014
LAHORE: The on-going stalemate in Indo-Pak trade liberalisation may have annoyed Indian policymakers but businessmen on the other side are still trying to assess Pakistani claims that India would restrict Pakistani imports under the current trade deal.

Various representatives of Indian industry have been visiting trade bodies in Pakistan to evaluate the legitimacy of claims against trade with India. “We are providing you the same market access that we are providing to all other countries,” said Manesh Mohen, Director R&D Confederation of Indian Industries during a visit to the office of All Pakistan Textile Mills Association. “What else do you want,” asked Mohen during a visit to Pakistan 

“Pakistan does not want any concession from India but they have made their duty structure particularly Pakistan specific in five textile categories where Pakistan has an advantage,” said APTMA Punjab Chairman S M Tanveer in reply to Mohen’s question. “We simply want a level playing field when it comes to access to Indian markets,” he said while conceding that MFN duties and the addition non ad-valorem duties are applicable on imports from all regions However, he said, a deeper look at these duties reveals that developed economies only pay the ad-valorem duties on high value added products while non ad-valorem duties would be applied on all Pakistani textiles exports. “For example the ad-valorem duty on cotton cloth is only 10 percent but a number of categories in cotton cloth are subject to a specified non ad-valorem duty in case the incidence of ad-valorem duty is lower,” he said. 

Tanveer went on to explain that in many cases non ad-valorem duties range from Rs50 to Rs200 per square meter. He said the average export price of one square meter Pakistani cotton cloth is $1.187. This, he added, translates into Rs72 Indian rupees. 

“This cloth will not be subjected to the normal 10 percent duty instead the duty may range from Rs50 to Rs200. In the first case Pakistani cloth will be subjected 60 percent duty and in other to almost 280 percent,” Tanveer said. 

Citing another example, Tanveer said the import duty on knitwear in India is 10 percent or Rs540 per piece whichever is higher. He said the average export price of knitwear from Pakistan is $19.51 per dozen or $1.62 per piece. A knitwear piece worth Rs100 Indian rupees will thus be subjected to a duty of Rs540 which is more than five times the price of the product, he added. 

“Whereas a $90 knitted European or American knitwear product will be cleared at 10 percent duty which would be Rs540,” he said, while citing the imbalance as a clear-cut example of how the trade deal is not fair. 

He said the duty on low-value added knitwear and readymade garment should be collected on the same percentage basis as is collected from high-end products. 

APTMA Vice Chairman Seth Muhammad Akber said that textile exports in Pakistan are made without any government subsidies while Indians subsidise their textile exports through refunds and subsidies. Under the Technology Upgradation Facility (TUF) alone the Indian government has paid $8 billion subsidy in 10 years, he added while providing documentary proof of this subsidy. 

He also presented Indian SROs and notifications which clearly show that the Indian government matches the funds collected by any Indian export association. “Even the CII gets half of its funding from the government that enables it to establish lobbying and marketing offices abroad,” he said adding that Pakistani trade associations do not enjoy these benefits. 

“Government subsidies should be factored in the duties by the Pakistani authorities before opening trade with India,” said Akber. 

A representative of a large textile house said that while Indian brand Raymond has opened two outlets in Pakistan and is soon going to be opening a third, no Pakistani textile brand has succeeded in securing a nod from the Indian government to open outlets in India. “All famous brands are trying to do this but their efforts are in vain,” he added. 

Textile entrepreneurs asked Pranov Kumar, head of the International Policy and Trade at CII, to discuss these issues with Indian authorities. “As a bigger economy it should be the Indians that facilitate smaller economies of the region with easy market access,” said one textile mill owner.