Pkrevenue.com

Author: Faisal Shahnawaz

  • Textile exporters oppose proposed plan for abolishing zero-rating, FTR

    Textile exporters oppose proposed plan for abolishing zero-rating, FTR

    KARACHI: The textile exporters have strongly opposed to the proposed withdrawal of zero-rating of sales tax and abolishing Final Tax Regime (FTR).

    Chairmen of Value Added Export Sector Associations in a joint Press Conference held at PHMA House Karachi while expressing deep concern stated that discontinuation of zero rated status will result in ruin and disaster of export oriented industries, flight of capital, mass unemployment and huge foreign exchange losses.

    It will also lead to corruption in connivance with dubious FBR officials under the mode of flying invoices, over invoicing, frauds in refunds etc. Further, due to significant volumes of liquidity being stuck in the form of sales tax refunds, export growth will be severely affected and we may even witness a decline in exports.

    More than 200 billion rupees of exporters in Refunds of Sales Tax, Customs Rebate, Withholding Tax, DLTL & DDT are already held up with Government.

    They also conveyed serious apprehension on proposed abolition of Final Tax Regime (FTR) for exporters.

    The Chairmen and Representatives of Council of All Pakistan Textile Mills Associations, Pakistan Apparel Forum, Pakistan Hosiery Manufacturers & Exporters Association, Pakistan Textile Exporters Association, Pakistan Bedwear Exporters Association, Towel Manufacturers Association of Pakistan, Pakistan Cloth Merchant Association, Pakistan Knitwear and Sweater Exporters Association, Pakistan Denim Manufacturers & Exporters Association, All Pakistan Textile Processing Mills Association, Pakistan Readymade Garment Manufacturers & Exporter Association, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association, The Surgical Instrument Manufacturers Association of Pakistan, Pakistan Leather Garments Manufacturers & Exporters Association, Pakistan Tanners Association, Pakistan Sports Goods Manufacturers & Exporters Association, Pakistan Carpet Manufacturers & Exporters Association, All Pakistan Bedsheets & Upholstery Manufacturers Association have fervently appealed to continue the Zero-Rating Scheme in the national interest to uplift exports. The five zero rated sectors are already documented and contribute 70% of total Nation’s exports and generate 50% of total Nation’s employment.

    They added that collecting sales tax and then refunding – is a futile exercise which creates hassles for exporters and also opens flood gates of corruption. No collection and no refund of sales tax from five zero rated export sectors is a tried and tested formula for increasing revenue and exports. We must not forget that during last two decades the Government had tried to undo zero rating twice but miserably failed, hence, zero rating was reintroduced.

    The zero rated scheme, in consultation with stakeholders, can further be improved for much better outcome.

    They added that the Government rather than involving in futile exercise of collecting sales tax and then refunding should focus its energy on increasing the number of taxpayers. According to FBR, in year 2017 number of active taxpayers was only 1.13 million only (0.51% of total population).

    They warned that Government’s attempt to collect interest free money in shape of sales tax will put the country’s export at stake. Today, in this period of worst economic crisis, can we afford to do away with zero rated status for the five export oriented industries? they questioned. They cautioned that if the Zero-Rating Scheme is discontinued, 30 percent of the export will decline in first year. They urged the Government to broaden the tax-base rather than burdening the existing tax-payers and documented sectors of the economy.

    Pakistan rupee has been devalued approx. 20.16% against dollar from 123.6 to 149.07 in just 9 months. Such state of affairs when the dollar is appreciating and banks are also reluctant to fix dollar rates, the Textile Exporters will be aggrieved in case of BMR because some machineries are delivered in 6 to 8 months and cost of machinery is increased to 20% during the period.

    Previously, on assurances of the Government to continue zero rating, exporters made huge investment in shape of BMR.

    They articulated that the Government focused on enhancing exports and identified the Five Zero-Rated Export Sectors as the main engines of growth for this purpose whereby Power Division vide Notification SRO12(I)/2019 dated 1st January, 2019 has revised the power tariff for zero rated industrial consumers to net 7.5 cents / kwh and OGRA vide Notification dated 18th October 2018 has been fixed Gas tariff for Registered Manufacturers or Exporters of five Zero-Rated sectors and their Captive Power to Rs600/- per MMBTU but discontinuation of zero rating status from the five export sector will put all the hard efforts of the government in vain.

    The Federation of Pakistan Chambers of Commerce & Industry, Karachi Chamber of Commerce & Industry, Lahore Chamber of Commerce & Industry, Faisalabad Chamber of Commerce & Industry & Sialkot Chamber of Commerce & Industry have also supported the stance and demand of Value Added Export Sector Associations to continue zero-rating scheme for the betterment of economy and export enhancement.

  • SBP renews status of credit rating agencies

    SBP renews status of credit rating agencies

    KARACHI: State Bank of Pakistan (SBP) has renewed the status of two leading credit rating agencies.

    In a circular issued on Tuesday, the central bank renewed the status of both credit rating agencies operating in Pakistan namely ‘VIS Credit Rating Company Limited (VIS)’ and ‘The Pakistan Credit Rating Agency Limited (PACRA)’ as eligible / recognized External Credit Assessment Institutions for the calendar year 2019.

    Banks and DFIs using the standardized approach of Basel framework are allowed to use credit ratings assigned by VIS and PACRA for capital adequacy ratio (CAR) calculation purposes.

  • Stock market falls by 748 points on profit taking

    Stock market falls by 748 points on profit taking

    KARACHI: The stock market fell by 748 points on Tuesday on aggressive profit taking by the investors.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 34,949 points as against 35,697 points showing a decline of 748 points.

    Analysts at Arif Habib Limited said that the market took a major bantering today after resisting the tide of profit taking since Friday.

    The meteoric rise of Index observed last week was matched today with a slide of ~800 points, although the index closed -748 points.

    A host of factors could have played a role behind today’s activity, including MSCI rebalancing, delay in launching State Enterprise and Opportunity Fund and also negative news flow on Cement manufacturers.

    Adding salt to the injury, conjecture on upcoming Budget also led to bearish sentiment amongst investors.

    Nonetheless, profit booking was already on the anvil post a rapid increase in Index last week. Selling was observed across the board, however, major volumes were seen in Cement, Banks and Chemical sectors.

    Sectors contributing to the performance include E&P (-170 points), Fertilizer (-163 points), Banks (-159 points), O&GMCs (-74 points) and Cement (-59 points).

    Volumes increased from 125.2 million shares to 152.3 million shares (+22 percent DoD). Average traded value also increased by 46 percent to reach US$ 49 million as against US$ 33.5 million.

    Stocks that contributed significantly to the volumes include FCCL, BOP, UNITY, EPCL and MLCF, which formed 28 percent of total volumes.

    Stocks that contributed positively include NESTLE (+24 points), PAKT (+17 points), PKGS (+7 points), PSMC (+6 points) and HCAR (+5 points). Stocks that contributed negatively include OGDC (-66 points), FFC (-62 points), HBL (-59 points), POL (-53 points) and PPL (-38 points).

  • Rupee falls by 45 paisas against dollar

    Rupee falls by 45 paisas against dollar

    KARACHI: The rupee has lost 45 paisas against dollar on Wednesday owing to higher demand for import and corporate payments.

    The rupee ended Rs150.25 to the dollar from previous day’s closing of Rs149.80 in interbank foreign exchange market.

    The interbank foreign exchange market was initiated in the range of Rs149.75 and Rs150.25.

    The market recorded day high of Rs151.00 and low of Rs49.25 and closed at Rs150.25.

    The exchange rate witnessed decline in rupee value in open market.

    The buying and selling of dollar was recorded at Rs149.00/Rs150.00 from previous day’s closing of Rs148.50/Rs149.50 in cash ready market.

  • Important meeting on exchange rate situation to be held today

    Important meeting on exchange rate situation to be held today

    KARACHI: Dr. Abdul Hafeez Shaikh to chair an import meeting of a committee which will also be attended by members of exchange companies association today (Tuesday) to discuss the options for strengthening the local currency.

    Prime Minister Imran Khan had constituted the committee suggestions submitted by Exchange Companies Association of Pakistan (ECAP).

    The meeting will also be attended by officials of State Bank of Pakistan and other relevant authorities.

    Malik Bostan, Chairman, ECAP will lead a five – member team at the meeting.

    According to the ECAP chairman the association had submitted proposals for the strengthening the rupee value.

    Malik Bostan said that the proposals had focused on improving foreign exchange reserves of the country.

    He said that due to recent measures the local currency had strengthened by Rs3 against dollar during last few days.

    Malik Bostan urged people not to pay heed on the rumors about shortage of dollar. He said that the greenback would further weaken in coming days.

    He said that the exchange companies had given around $15 million to scheduled banks.

    He said that inflows were coming from overseas Pakistan on the occasion of Eid-ul-Fitr. “The overseas Pakistanis are sending around $3-4 million daily,” he said.

    Malik Bostan said that hopefully another $100 million would be given to scheduled bank by Eid-ul-Fitr.

  • FBR withdraws zero-rate facility to textile unit for no business activity at declared address

    FBR withdraws zero-rate facility to textile unit for no business activity at declared address

    KARACHI: Federal Board of Revenue (FBR) suspended zero-rated sales tax facility on supply of electricity and gas to a textile unit for not operational at declared place of business activity.

    The FBR issued Sales Tax General Order (STGO) No. 98 and 99 to withdraw the sales tax zero-rated facility on supply of electricity and gas to M/s. Teetex Industries because the unit was no more operational at the declared place.

    The FBR directed Chief Commissioner Inland Revenue, Corporate Regional Tax Office, Karachi to coordinate with K-Electric and SSGCL regarding implementation of the amendment in the general order and submit report in respect of action taken/ recovery made, if any, for misuse of the facility.

    The FBR also asked K-Electric and Sui Southern Gas Company Limited to start charging sales tax on the supply of electricity and gas to the taxpayers with immediate effect.

  • FBR urged to extend tax credit to investment in infrastructure

    FBR urged to extend tax credit to investment in infrastructure

    KARACHI: Federal Board of Revenue (FBR) has been urged to extend tax credit facility to investment in factory building and manufacturing related infrastructure.

    Pakistan Tax Bar Association (PTBA) in its tax proposals for budget 2019/2020 said that tax credit under section 65E of Income Tax Ordinance, 2001 is restricted to investment in plant and machinery.

    Tax credit under section 65D is available only at the time of setting up a new industrial undertaking. No tax credit is given on subsequent expansion of such an industrial undertaking since section 65E restricts eligibility to companies formed before 01 July, 2011.

    Expansion of plant or undertaking a new project involves investment in factory building and manufacturing related infrastructure and as such, these types of investments should also be made eligible for tax relief.

    Expansion is also possible in industrial units’ set-up after 01 July, 2011.

    It is, therefore, recommended that tax credit under section 65E should also be extended to investment in factory building and manufacturing related infrastructure.

    Applicability of section 65E to only such companies’ setup after 01 July, 2011 may be relaxed to include industrial undertakings formed thereafter as well, which undergo expansion.

    An increased availability of tax credits may act as an incentive to new investment since the investors foresee tax benefits which they may practically be able to utilize.

    The tax bar further highlighted that tax credits under sections 65B and 65E are restricted to investment in plant and machinery.

    The rational behind these tax credits is not the purchase of plant and machinery but industrial expansion and increased economic activity. In this regard, it may be appreciated that expansion of business (and the consequent increase in economic activity) is not achieved from plant and machinery in isolation and is, for all practical purposes, not possible without an appropriate support structure.

    In order to streamline section 65B(4) with the wordings of section 65B(1), the following wording, in bold, may be inserted:-

    “65B (4) make an investment for the purposes of extension, expansion, balancing, modernization and replacement of the plant and machinery.”

    An explanation be added to sub-section (1) of Section 65B:-

    “For removal of doubts, for the purposes of this section, it is declared that the words “purchase of a plant and machinery” includes all direct expenses which are necessary to make the Plant and Machinery in a workable condition and also includes factory buildings and manufacturing related infrastructure.”

    Tax credit under Section 65E should also be extended to investment in factory building and manufacturing related infrastructure, the PTBA recommended.

    The proposed amendment/modification in tax credits will clarify the ambiguity for the companies’ set-up before first day of July, 2011 and shall promote industrial expansion and increased economic activity.

  • FBR asks refund claimants to open CDC account

    FBR asks refund claimants to open CDC account

    KARACHI: Federal Board of Revenue (FBR) has asked taxpayers, who opted for a sales tax refund through bonds, to open their accounts with the Central Depository Company (CDC).

    In an advisory issued on Monday, the FBR said that refund claimants who have opted for sales tax payments through bonds should open investor account with the CDC if they do not already have such accounts.

    FBR said that refund claimants who have opted for payment through bonds but have not provided proper CDC account as per given format, can update CDC accounts by visiting FBR website.

  • KSE-100 earnings decline by 1.2pc in July – March

    KSE-100 earnings decline by 1.2pc in July – March

    KARACHI: The earnings of benchmark KSE-100 index of Pakistan Stock Exchange witnessed a decline of 1.2 percent year on year during July – March 2018/2019.

    Analysts at Arif Habib Limited said on Monday that based on sectoral weight, this was led primarily by Cements (-7.8 percent YoY; 5.7 percent weight), Oil & Gas Marketing Companies (-65 percent YoY; 4.3 percent weight), Automobile Assemblers (-44 percent YoY; 3.1 percent weight), and Pharmaceuticals (-34 percent YoY; 1.9 percent weight).

    Whereas sectors that remained top performers were Commercial Banks (+2.1 percent YoY; 28.0 percent weight), Oil & Gas Exploration Companies (+35 percent YoY; 15.7 percent weight), Fertilizers (+5.7 percent YoY; 14.3 percent weight), Power Generation & Distribution (+21.5 percent YoY; 6.5 percent weight), Chemicals (-10 percent YoY; 2.0 percent weight), and Miscellaneous (-63 percent YoY; 1.8 percent weight).

    In particular, profitability during 9MFY19 declined by 4.3 percent YoY driven by profits’ attrition in heavy weight Commercial Banks (-27.2 percent YoY) while Oil & Gas Exploration Companies (+46 percent YoY) and Fertilizers (+20.1 percent YoY) posted profitability improvements.

    Sequential downturn in bottom-line of the KSE100 index arrived at 3.5 percent QoQ led by pressure faced by Oil & Gas Exploration Companies (-8.8 percent QoQ) and Fertilizers (-23 percent QoQ).

    Sectors leading the profitability chart during 9MFY19 were Synthetic & Rayon (+147.8 percent YoY), Textile Weaving (+143.5 percent YoY), and Vanaspati & Allied Industries (+137.3 percent YoY). During 3QFY19, Textile Weaving (+158.8 percent YoY), Woolen (+139.7 percent YoY) and Paper & Board (+102.0 percent YoY) led the earnings chart of the index.

    During 3QFY19, the KSE100 index rose by 1,583 points (+4.3 percent QoQ) majorly owing to Banks (919 points), Oil & Gas Exploration Companies (814 points) and Fertilizers (617 points).

    During 9MFY19, the KSE100 index declined by 3,259 points (-7.8 percent YoY) with the bearish trend being led by Commercial Banks (-317 points), E&P Companies (-298 points), Cements (-497 points) and the Power sector (-387 points).

    On the other hand, Fertilizers (+632 points) and Tobacco (+193 points) contributed positively to the index.

    We have based our analysis on the KSE100 index companies. 94 companies have announced their results and have been included in this analysis while the remaining 6 companies have not yet disclosed their results.

    The companies which have been included in our analysis represent almost 96 percent of the market capitalization of the benchmark bourse.

  • FBR bans entry of unauthorized persons, Lappoos into custom houses

    FBR bans entry of unauthorized persons, Lappoos into custom houses

    KARACHI: Federal Board of Revenue (FBR) has restricted entry of unauthorized persons, including privately hired persons by customs officials (Lappoos), into custom houses with immediate effect.

    In a statement issued on Monday, Pakistan Customs said that FBR chairman Syed Muhammad Shabbar Zaidi ordered the ban on entry of unauthorized persons into customs station in order to ensure transparency in clearance system.

    The FBR chairman while taking notice of presence of large number of visitors for making the entire clearance system doubtful, had ordered Customs Wing to strictly restrict, entry into Customs Houses, only to the concerned traders, their authorized representatives and members and relevant trade bodies/ associations.

    Accordingly Customs Wings is in process of issuing instructions to its field formations for immediately restricting entry of all un-authorized persons, the statement said.

    The visiting hours for traders and their authorized representatives for fulfillment of needed legal formalities in cases involving second review before Assistant / Deputy Collectors shall be limited from 10:00 Am to 1:00 PM.

    The press release said that Pakistan Customs is operating its Web Based One Customs (WeBOC) system in order to facilitate the trade and provide ease of doing business in carrying out imports, exports and transit trade.

    This system is available 24/7 and allows on-line submission and processing of documents as well as electronic payments of duty and taxes.

    As such the need for traders and their representatives to physically visit offices of Customs has drastically been reduced.