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Category: Trade & Industry

This section covers news on trade and industry. Pakistan Revenue is committed to providing the latest updates on business trends.

  • FBR urged to allow tax holiday on import of industrial raw material

    FBR urged to allow tax holiday on import of industrial raw material

    KARACHI: Federal Board of Revenue (FBR) has been urged to allow tax holiday to import of industrial raw material in order to help the country to fetch much needed foreign exchange through enhanced exports.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 submitted to the FBR, said that Pakistan’s exports are limited to very few sectors.

    Payment of cash subsidies and multiple currency depreciation failed to improve exports. As per Fifth Schedule to the Customs Act, 1969 Imports of Textile Machinery and equipment for textile sector is exempted from custom duty and rate of withholding tax is one percent by the textile manufacturing units registered with Ministry of Textiles whereas for other industries Customs Duty is levied at 5.5 percent which is discriminatory and an anomaly.

    The exports of non-traditional items have not been promoted due to such discriminatory treatment.

    Pakistan could not achieve true export potential which exists in many sectors.

    The KCCI proposed that there is a need to go beyond textile and agriculture products.

    Export diversification is important. For this all industrial machineries and equipment not locally manufactured may be exempted from Customs Duty, Additional Customs Duty/Sales Taxand Additional Sales Tax.

    Withholding Income Tax may be charged at 1 percent, which may be Adjustable/Refundable.

    Machineries with latest technology will be imported production will increase for local consumption and for global exports.

    Employment and government revenue will increase.

  • Commercial importers demand abolishing CNIC condition, FTR restoration

    Commercial importers demand abolishing CNIC condition, FTR restoration

    KARACHI: Commercial importers have demanded the government of abolishing condition of Computerized National Identity Card (CNIC) and restoring Final Tax Regime (FTR) in order to save businesses from adverse impact of COVID-19.

    Amin Yousuf Balgamwala, Chairman Pakistan Chemical Dyes and Merchants Association (PCDMA) and former Director of Karachi Stock Exchange has appealed to Prime Minister Imran Khan to restore FTR and SRO 1125 in the upcoming budget 2020/2021 in the best economic interest of the country so that trade and industry can be saved from complete destruction due to ongoing COVID-19 pandemic.

    In an appeal to Prime Minister, Balgamwala said that the business of commercial importers has been ruined as a result of corona lockdown and severe economic crisis.

    For the prevention of this pandemic all over the world including Pakistan were announced a lockdown to save the lives of masses.

    Due to closure of industries and markets, the capital of commercial importers was stuck and now the situation has reached such a stage that commercial importers do not even have the funds to revive the import of raw material.

    “If import of raw material would be stopped then it will be very difficult to supply raw material to export-oriented industries accordingly their requirement especially textile sector, which is the backbone of Pakistan economy, as country economy is already suffering from serious crises so if there is a shortage of raw materials, the production activities of the export-oriented industries  including textile sector will also be hampered which will have a very negative impact on the country’s exports,” he pointed out.

    PCDMA chairman questioned pursuing a pick and choose strategy by the government and said that it is a matter of concern for the business community but the government should understand the delicacy of the current extraordinary situation and provide relief to all sectors of economy.

    “Whether it is the export sector or the import sector, the government should provide relief across-the-board without any discrimination so that the businesses and industries affected by the COVID-19 pandemic can get stand up again on their feet,” he opined.

    Amin Balgamwala demanded the Prime Minister to abolish the CNIC condition on sale of goods to unregistered persons and said that if immediate relief was not given to commercial importers, they would be forced to close their business. In addition to reinstating SRO 1125, chairman PCDMA also demanded to restore a fixed tax regime (FTR), which is the only way to save trade and industry from collapse.

    He also requested to keep petrol pumps open 24 hours a day for uninterrupted supply of raw materials to the industries and appealed to the Prime Minister to allow business 6 days a week also so as to offset the losses caused by the corona lockdown.

  • KCCI urges government to shun pick, choose policy for business relief

    KCCI urges government to shun pick, choose policy for business relief

    KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) has urged the government functionaries to avoid ‘pick and choose’ strategy for providing relief to businesses as it will never benefit the national economy.

    Chairman Businessmen Group (BMG) & Former President KCCI Siraj Kassam Teli and President KCCI Agha Shahab Ahmed in a statement on Thursday appealed the Prime Minister Imran Khan, Advisor Finance Hafeez Shaikh, Advisor Commerce & Investment Abdul Razak Dawood and Federal Minister for Industries & Production Hammad Azhar to announce across the board relief to all sectors of the economy instead of pursuing a pick and choose strategy which would never benefit the domestic economy or the people in the middle and lower income categories.

    Siraj Teli and Agha Shahab have emphasized that all the businesses and industries have been suffering losses and struggling to survive in business due to the outbreak of coronavirus pandemic.

    No industry or business have been spared by the impact of pandemic on economy, hence it is necessary to announce an across the board relief package for all sectors of trade and industry irrespective of size and level of business, so that businesses could survive unprecedented crisis and economic shocks.

    Recent relief packages announced by the SBP are limited mainly to export sectors or certain medium to large employers.

    Major part of the SMEs and nearly all domestic industries and businesses have not been benefited by any such package.

    Most of the businesses and industry are finding it hard to stay solvent in the present circumstances and may be forced to declare bankruptcies if timely relief is not provided to them.

    Chairman BMG Siraj Teli said: “As survival is the name of the game so the government should immediately extend relief at any cost without wasting time otherwise the businesses are going to become bankrupt and the economy would consequently sink. Support businesses now for survival and you (the government) can earn later.”

    President KCCI Agha Shahab said, “The pick and choose strategy being pursued by the government is discriminatory towards domestic industry and trade, which is neither in the interest of businesses nor the economy so it has to be stopped and immediate relief must reach out to all categories and sectors of trade and industry rather than one or two selected sectors.”

    Appreciating the relief provided in electricity bills for consumers below 300 units and also the reduction in petroleum prices, Siraj Teli and Agha Shahab said that the business and industrial community welcomes these moves but these were not adequate and there is a need to do more.

    In this regard, the government must announce further reduction in petroleum prices and also slash the electricity tariff, Sales Tax, Income Tax, Federal Excise Duty and Withholding Tax by 50 percent which would provide immediate relief to the entire nation.

    They further advised the government to bring down the interest rate to four percent in line with strategies adopted by the economies around the world where the interest rates have been slashed down to zero and even negative in some cases.

    They said that reduction in policy rate in bits and pieces is not enough to provide much needed stimulus to the economy hence, it is necessary to significantly reduce the interest rate in one go to 4 percent to help businesses sail through the unprecedented crisis.

    “All these measures would provide some breathing space to industries by bringing down the cost of doing business which is the need of the hour as these will provide much needed cash flow and help to avoid layoffs which have already started taking place.”

    While referring to relief measures given to some sectors and businesses, they opined that it is not certain that the government was going to get the expected returns from these sectors in the ongoing extremely critical situation in which every single business from a small trader to leading industrialist has his survival at stake so the government has to stop focusing on revenue generation and extend relief across the board which is desperately needed for the survival of the economy and businesses.

    “This year, the government will have to forget revenue and reduce its expenditures which is the only way to save businesses from total collapse and also the masses from unemployment, poverty, hunger and starvation. Practical and out of box measures have to be taken to spend minimum amount of funds on running the affairs of the government while all the saved funds must be utilized to support businesses”, they added.

  • FBR officials treat taxpayers as criminal using search powers

    FBR officials treat taxpayers as criminal using search powers

    KARACHI: Business community has resented the use of powers related to search by Inland Revenue officers and treating registered taxpayers as criminal.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 demanded amending such provisions to avoid such misuse of powers.

    The KCCI while highlighting provision Section 40 of Sales Tax Act, 1990, said that the officers of Inland Revenue at their discretion and opinion may obtain a warrant from the magistrate and conduct searches of the premises of registered persons at any time.

    The search made under sub-section (1) shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (V of 1898).

    The chamber said that the officials are treating registered persons as criminals.

    Powers to enter and search any place gives immense powers to officers of Inland Revenue. Such powers can be misused for harassment and extortion of tax payers.

    The law also does not define the “place” which can be search, therefore it may include homes and personal residences of tax payers.

    The chamber proposed that the provisions should be amended to prevent misuse.

    “No searches should be made without prior notice in writing to the registered person. No searches may be conducted outside the working hours and holidays or immediately prior to holidays.”

    The proposed amendment shall alleviate fears of the business persons and it will also encourage new tax-payers and curtail discretionary powers.

  • Garments exporters demand sales tax zero rating revival

    Garments exporters demand sales tax zero rating revival

    LAHORE: The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has demanded the tax authorities to reintroduce zero-rated sales tax regime.

    In its proposals for budget 2020/2021 submitted to Federal Board of Revenue (FBR), the PRGMEA demanded restoration of zero-rated regime of ‘no payment and no refund of sales tax’ for export-oriented sectors including textile at least for one year to sustain the industry amidst the severe liquidity crunch due to COVID-19.

    The government should release all stuck claims of the exporters, including DLTL, DDT, Customs Rebates and Sales Tax rebates, as the liquidity crunch is a major stumbling block in the way of improving exports.

    It said the apparel industry should be allowed to import fabric under the SRO 492 scheme, as the weaving industry of Pakistan is unable to fulfill demand for fashion wear, adding, the government should also announce complete 100 percent drawback rate of incentive at 7 percent without the condition of increment with simple procedure and paperless working for two years (2019-2020 and 2020-2021).

    Ijaz A. Khokhar, chief coordinator PRGMEA, in a statement said they had also suggested the government that incentive amount should be directly credited to the exporter’s account at the time of realisation of export proceeds and State Bank of Pakistan may subsequently claim the amount from the government.

    Moreover, Khokhar said the government should also extend the last date for submission of claims of duty drawback.

    The PRGMEA demanded a one-window operation so that the exporters could focus on the market research and marketing for their products, besides proposing that cotton yarn, the major raw material of apparel sector, should be exempted from all duties and taxes to encourage value-addition.

    One-window operation may effectively be introduced to replace the lengthy procedures that involve interaction of manufacturer with various agencies. At the moment, different government agencies have been harassing the textile industry virtually every day. Social Security, EOBI and all other taxes should be merged and deducted at source. The government exchequer will receive more revenue, if a reasonable percentage of realised amount is deducted. And many of the SMEs companies will add in the tax net automatically.

    The PRGMEA also urged the government that the custom duty of 7 percent on import of Polyester staple fibre including a range of 20 percent anti-dumping duty should be abolished to reduce the cost of production to compete in the market.

    It further said that exporters had received just 35 percent of claims payment only, while 65 percent of the refund claims were stuck with the government, which cumulated 12 percent of the exporters’ running capital; however, the profit margin of exporters was around five to eight percent.

    “Due to availability of liquidity and smooth cash flow, the confidence of exporters will be boosted to enhance their exports and cement their business ties with the foreign counterparts to capture true business potential,” it added. The government has given assurance to clear all pending claims, but the factual position is that more and more refund claims are piling up with the payment of just a small number of claims.

    PRGMEA asked the government should announce a clear policy to finally clear all the pending refund claims.

    The trade association also requested that import of fabric be allowed under SRO 492 instead of DTRE, which was very complicated and only 2 percent exporters could avail importation under DTRE facility, whereas 97 percent SME sector could be facilitated under SRO 492, which was enforced previously.

    To compete with Bangladesh and India; it is very important for Pakistan to offer the same products as they are exporting in large variety.

    It said the incentive amount should be directly credited to the exporter’s account at the time of realisation of export proceeds and SBP may subsequently claim the amount from the government. The condition of “after receipt” should be abolished and prompt payment shall be made. Otherwise, again backlog of payments to be made to exporters shall be created as previous payments of billions of rupees have not yet been made to the exporters.

    PRGMEA also proposed that since WEBOC system was available then why do exporters need to submit the hard copies for processing of rebate and DLTL claims. “As soon as the bank may report payment realisation on WEBOC, rebate and DLTL claims should be highlighted in Green and entitled for disbursement of refund,” they added.

  • OICCI suggests eliminating Sindh infrastructure cess

    OICCI suggests eliminating Sindh infrastructure cess

    The Overseas Investors Chamber of Commerce and Industry (OICCI) has made a fervent appeal to the Sindh government, imploring for the withdrawal of the Infrastructure Cess to alleviate the burden on the cost of doing business.

    (more…)
  • Karachi Chamber seeks fair tax treatment for commercial importers

    Karachi Chamber seeks fair tax treatment for commercial importers

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has sought fair treatment on collection of withholding tax for commercial importers on import of industrial raw material.

    KCCI in its budget proposals submitted to the Federal Board of Revenue (FBR), said that under Section 148(1) of Income Tax Ordinance, 2001, 6 percent withholding income tax is levied on import of industrial raw materials, whereas manufacturers are exempt from such withholding tax at import stage under Section 159 read with Rule 72B (PART IV OF SECOND SCHDULE OF Income Tax Ordinance, 2001).

    The exemption has created disparity of 7 percent between commercial importers and manufacturers in total incidence of taxes (when 3 percent further tax are included).

    This anomaly has led to rampant misuse and evasion of taxes through over-import by manufacturers for trading purpose, fake registrations by commercial importers and corruption in tax offices for issuance of exemption certificates U/S 159 (1).

    The KCCI said that most of the commercial importers of Raw Materials have now registered as manufacturers to avoid high rate of WHT, 3 percent value addition tax and further tax of 3 percent.

    Nearly 90 percent of all industrial raw material is now imported under the category of manufacturers, while the industry also imports raw materials for trading.

    Loss of revenue is at over Rs.80 billion on total raw material import of Rs.3,250 billion in Pakistan.

    The KCCI proposed that the rate of withholding tax on import of raw materials should be equal for both commercial importers and manufacturers and fixed at 3percent on import stage.

    Further, exemption under Rule 72B (PART IV OF SECOND SCHDULE OF ITO) on raw materials imported by manufacturers should be withdrawn and disparity in WHT may be removed.

    The rate of withholding tax on commercial importers is very high and should be reduced to 1.5 percent to qualify as minimum tax as is the case for industry and large import houses.

    The chamber said that the measure will help broaden tax base, prevent misuse of exemption by fake registration as manufacturers.

    Besides, this will help in substantial Increase in revenue collection through rationalization.

    The KCCI said that the commercial importers of raw materials are a major support to SMEs and recover taxes on behalf of the government.

    Therefore, rationalization will revive the commercial import, support SMEs and prevent misuse of exemption.

  • KCCI proposes regularizing gold, jewellery sector

    KCCI proposes regularizing gold, jewellery sector

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has submitted proposals to tax authorities for regularizing gold and jewellery sector.

    In its proposals for budget 2020/2021, the KCCI said that gold and Jewelry sector has always been a neglected and largely unregulated sector.

    No clear policy on import of Gold and precious metals has been formulated while also the export of finished Jewelry has no incentives.

    There is a massive demand and consumption of gold, silver and gems in Pakistan and annual consumption of gold is estimated at 160.0 metric tons.

    The chamber said that the demand is met mostly by undocumented sector because the foreign exchange is not provided by State Bank of Pakistan for import of gold.

    Clause under Serial.No.16 of Part II of Import Policy Order 2016, which deals with import of Gold and Silver, stipulates the condition ‘Importable subject to the condition that importer shall arrange his own foreign exchange for the purpose’.

    But there is no provision under the Foreign Exchange Rules which provides the necessary procedure to allow the importers to arrange own foreign exchange and remit the same to the supplier.

    This has resulted in smuggling and undocumented trade in Gold, and a major sector which has immense potential for exports and revenue generation is suffering with rapid decline.

    Thousands of goldsmiths, artisans and workers have lost their jobs. This sector has the capacity to produce high quality gold ornaments and designer jewelry for export.

    The Karachi Chamber proposed that the sector can be a major employer and source of revenue if appropriate policy governing import of precious metals, documentation of sales and rational tax rates are implemented in consultation with stake holders.

    Import of Gold and Silver may be allowed against payment in foreign exchange arranged by importers through local market (exchange companies and banks). Necessary legislation may be promulgated to legalize the jewelry trade.

    It will help in curtailing smuggling of gold, silver and gems. Further, jewelry trade will be documented because if the import is legalized then the subsequent entities in supply chain will be documented.

    Besides, this will unleash the potential of a large sector to contribute in growth, employment of highly skilled workers and export of Jewelry.

  • Conditions for masks import should be relaxed: Khurram Ijaz

    Conditions for masks import should be relaxed: Khurram Ijaz

    KARACHI: Khurram Ijaz, Vice President, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the authorities to relax conditions on import of face masks and facilitate masses considering the spread of coronavirus.

    In a statement issued on Friday, Ijaz urged Drug Regulatory Authority of Pakistan (DRAP) to take measures for early release of stuck-up face masks at the ports.

    Khurram Ijaz said that the cases of coronavirus was on the rise. This requires that all medical facilities including face masks should be available in huge quantity.

    He said that the procedures of clearance for face mask import should be made easy.

    The vice president said that due to lethargy of DRAP a huge quantity of face masks were stuck up at the ports and it would badly hurt the supply chain, especially in the wake of rising coronavirus cases.

    The delay in clearance will also increase prices of masks in the local market, he added.

    He urged the authorities to consider the urgency and take immediate measures for release of stuck up masks.

  • Regulatory duty must be rationalized to curb smuggling: Karachi Chamber

    Regulatory duty must be rationalized to curb smuggling: Karachi Chamber

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has urged tax authorities to rationalize the regulatory duty on imported goods in order to curb smuggling.

    In its proposals for budget 2020/2021, the KCCI said that the regulatory duty was imposed in last fiscal year to rectify the balance of payment crisis.

    To some extent the regulatory duty on imported food items supported the food items produced locally but most of those items which are not produced locally due to climate and resources, have to be imported.

    High rates of RD on imported food items has sharply increased cost of import and consequently these items have been pushed into smuggling regime.

    “Rampant smuggling of these items is taking place with impunity making it impossible to import through documented channels.”

    The KCCI  Major loss of revenue to exchequer because smuggling mafia makes everything available without paying any taxes and duties.

    Imposition of regulatory duty is the main cause that such commonly used items like dry-fruits, nutrition, honey, grains, pulses and spices are being imported through illegal channels which is causing significant damage to the economy of the country.

    The KCCI suggested that regulatory duties should be rationalized and in some cases withdrawn to curtail smuggling and help to increase in revenues, documentation of trade and support the exports as many of the imported items are industrial raw materials which are re-exported to generate foreign exchange for Pakistan.