Dr. Reza Baqir, the Governor of the State Bank of Pakistan (SBP), has called on the business community to reduce cash transactions to aid economic growth. Speaking to members of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Friday, Dr. Baqir emphasized the importance of promoting transactions through the banking system.
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This section covers news on trade and industry. Pakistan Revenue is committed to providing the latest updates on business trends.
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Yarn merchants demand restoration of 1pc withholding tax for textile value chain
KARACHI: Pakistan Yarn Merchants Association (PYMA) has demanded the Federal Board of Revenue (FBR) to restore one percent advance income tax for textile value chain.
In a statement on Tuesday, Muhammad Saqib Goodluck Chairman, PYMA (Sind & Baluchistan Zone) strongly protested over imposition of 4 percent withholding tax instead of 1 percent requested to withdraw recent clarification of FBR.
He said that during different meetings with FBR, imposition of 1 percent withholding Tax was agreed over Textile Value Chain (Doubling, Twisting, Knitting, and Weaving) but clarification from FBR says imposition of 4 percent withholding Tax instead of 1 percent on whole Textile Chain, is not acceptable at any cost.
Saqib Goodluck in his letter to Chairman FBR, Shabbar Zaidi has clearly refused to accept imposition of 4 percent withholding tax instead of 1 percent and declared this step of FBR as highly disastrous said that on total amount of every receipt, 4 percent advance income tax could not collected which will increase the cost.
On purchase of cotton from Ginners, deduction of 4 percent from invoice will increase pressure on Ginners to reduce cost of cotton.
In fact, they must be responsible for ginning charges which is 35 percent of ginned cotton. Similarly, from manufacturing of yarn up to manufacturing of cloth, imposition of every tax will develop highly negative impacts on cost and local raw material.
He further said that local manufacturers spinning units and commercial importers of yarn works at low margins but large volume, when it reach up to retails stage with reference to polyester chain, it comprises four to five stages.
If upon fourth or fifth stage, 4 percent tax deducted, then cost of raw material will increase and ultimately withholding tax will increase from total margin and cases of income tax.
Refund will increase, which takes a long time to receive. It will be more difficult than GST because deduction of withholding tax on input carries no subsidy.
A large number of production units are engaged in exports as well as sales in local market.
FBR while examining audited balance sheets of public listed companies and other companies that withholding tax received over lesser margin is how much excessive. Therefore, for the survival of whole textile value chain 1 percent withholding tax must be implemented.
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High tax rates to discourage industrialization: KCCI
KARACHI: Raising the tax rate is not the right solution for enhancing revenue as it will discourage expansion and industrialization but the actual solution lies in broadening the tax net, Junaid Makda, President, Karachi Chamber of Commerce and Industry (KCCI) said in a statement on Saturday.
The broadening of the tax base will subsequently share the burden and bring down the tax rates that would surely encourage the business & industrial community to go for expansion, Junaid Makda said, adding that it would in turn result in maximum production, excellent sales, enhanced revenue collection, massive number of employment opportunities, poverty alleviation and long term economic prosperity.
Makda, while appreciating the good intent of Prime Minister Imran Khan to improve the revenue collection, was, however, skeptical as the Federal Board of Revenue (FBR), which is responsible to implement the policies for enhancing revenue from all over the country, has kept its revenue collection activities confined to Karachi only whereas the rest of Pakistan stands exempted from all these policies as perceived.
Junaid Makda said that FBR wants to achieve the revenue target by further squeezing the existing taxpayers of Karachi which was already contributing a mammoth sum of more than 70 percent revenue to the national exchequer whereas no such activity was visible in any other city or province of the country.
“We are not against the actions being taken to strictly deal with tax evaders from Karachi who must also be brought into the tax net along with tax evaders from other areas of the country but the loyal taxpayers should not be harassed and overburdened with exorbitant taxes,” he added while underscoring the need to strictly implement policies in every single nook and corner of the country.
He said that the cost of doing business was already too high due to import/ regulatory duties, upsurge in dollar rate and exorbitant taxes etc. while many industries were finding it hard to continue their activities and even those industries, which were somehow surviving, have no other option but to pass on the burden to consumers that has resulted in across-the-board inflation.
He stressed that the government will have to follow the supply side of economics where more revenue is generated through growth, wherein taxes are reduced along with consumer prices that would lead to quantum growth and appreciation in net revenue as well.
Increase in taxes reverses the growth and it would start declining, ultimately reduce the revenue already being achieved and above all high taxes are incentive for evasion, he added.
President KCCI requested the Prime Minister Imran Khan to issue directives for broadening the tax base and implementing the relevant policies all over the country in letter and spirit which would certainly yield positive results.
He reaffirmed that exorbitant tax rates along with cumbersome procedures and frequent issuance of anti-business and anti-taxpayers SROs/ notifications would result in closure of massive number of industrial units, significantly dent government’s revenue and render hundreds of thousands jobless.
“We understand that the country is in dire need of additional revenue but one should realize that revenue must come from new sources and even if it is taken from old sources, it needs to be rationalized and kept at the lowest level in order to attract thousands of individuals, who prefer to stay away from the tax net keeping in view the hardships being faced by loyal taxpayers”, Junaid Makda said, adding that heavy taxation has been imposed across the board and this additional burden has terribly affected the businesses and growth, which is already in a declining mode and may suffer more in the days to come.
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NAB not to process sales tax, income tax cases of business community
KARACHI: Justice Javed Iqbal, Chairman, National Accountability Bureau (NAB) has said that the bureau will not process cases of income tax and sales tax of business community.
He was talking with Engr. Daroo Khan Achakzai, President, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) at a meeting, said a statement issued by FPCCI on Friday.
A delegation of FPCCI under the leadership of President FPCCI Engr. Daroo Khan Achakzai met Chairman NAB, Justice Javed Iqbal at NAB Head Quarter Islamabad.
During the meeting Engr. Daroo Khan Achakzai expressed his views that entire business community of Pakistan appreciates the role of NAB and the measures taken by it for transparency and curb the corruption of the country.
He said that business community is the backbone of the country contributing in economic development. NAB is business friendly institution that considers business community as its priority and addressing the issues.
Chairman NAB said that NAB would not process the cases of income tax and sales tax of business community and has ordered to return back all previous cases of business community to FBR as per law. He informed that he has ordered withdraw all notices served by NAB Multan on owners of flour mills of Multan, Bahawalpur and D.G Khan division. He said that he himself would review the notices of flour mills.
President FPCCI Engr. Daroo Khan Achakzai appreciated the personal efforts of Chairman NAB for looking into the of issues of entire business community. He thanked the Chairman NAB for the establishment of Special Cell for entire business community in NAB Secretariat.
Chairman NAB Justice Javed Iqbal also acceded to the request of President FPCCI for visiting the Federation House.
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Tax measures, rupee depreciation adversely hit auto industry
KARACHI: The revenue measures taken by the government in the budget 2019/2020 and massive depreciation in Pak Rupee value have been major challenges for the auto industry as these factors have already adversely hit the sales volumes in the first half (January – June) 2019, a report said.
Pak Suzuki Motors Company Limited in its report for the period ended June 30, 2019 (January – June 2019) said that sales volume of auto industry for cars and light commercial vehicles was recorded at 118,519 units compared to 134,494 units in corresponding period of last year, registering decrease of 12 percent.
Sales volume of the Company during the half year January – June 2019 declined by 11 percent from 76,482 units to 68,147 units, in line with industry trend.
The total sales volume of the Company represented 56 percent of Pakistan’s total market of cars and light commercial vehicles. The Company operated at 80 percent capacity utilization and achieved production volume of 60,098 units, the report said.
During the period under review, the organized market (PAMA member companies) for motorcycles and three wheelers decreased from 990,102 units to 855,396 units. Decrease of 134,706 units represents 14 percent decline in sales volume over same period of last year. However, Company sales volume remained consistent and achieved sales volume of 11,600 units as compared to sales volume of 11,292 units in corresponding period of last year.
The report said that the company incurred net loss of Rs 1,526 million compared to net profit Rs 1,298 million in same period of last year. Net sales revenues increased by Rs 3,145 million from Rs 62,284 million (Jan-Jun 2018) to Rs 65,429 million (Jan-Jun 2019).
Higher prices in current period contributed in increased sales revenue by 5 percent over the same period of last year. Gross profit decreased in absolute terms by Rs 2,886 million from Rs 4,258 million (Jan-Jun 2018) to Rs 1,372 million (Jan-Jun 2019). Gross profit margins as a percentage of net sales declined from 6.8 percent to 2.1 percent of net sales.
“Devaluation of Pak Rupee resulted in increase in imported material cost, consequently adversely affecting the gross profit margins.”
It said that Pakistan’s economy is in difficult situation. “We witnessed sharpest increase in policy rates in recent time by State Bank of Pakistan (SBP).”
SBP further increased policy rate by 100 basis points to 13.25% in ‘Monetary Policy’ announced in July 2019. Average inflation for fiscal year 2019-20 is expected to remain in the range of 11% to 12% due to higher fiscal deficit, inflation and Pak Rupee depreciation.
In July 2019, the Executive Board of the IMF program approved a 39-month arrangement under the Extended Fund Facility (EFF) for US$ 6 billion to support the Government of Pakistan’s economic reform program.
Outlook for external financing has improved with the disbursement of the first IMF tranche associated with IMF EFF, activation of Saudi Oil Facility and other commitments from multilateral and bilateral partners.
Current Account deficit has continued to fall reducing external pressure.
The tax measures announced in the Federal Budget 2019-20 have severely hit the auto industry. Additional Customs Duty (ACD) on imported material has been increased by 2 percent to 5 percent. The government also imposed ‘Regulatory Duty’ on import of different kinds of vehicles. The government has enlarged the scope of Federal Excise Duty (FED) and imposed FED on locally assembled cars as well as on imported cars at the rate of 2.5 percent with engine capacity up to 1000cc, 5 percent from 1001cc to 2000cc and 7.5 percent on 2001cc and above.
Tax credit on investment in Plant & Machinery under section 65B of Income Tax Ordinance 2001 has been reduced from 10 percent to 5 percent for tax year 2019 while no tax credit from tax year 2020 and onwards.
Further Government withdrew gradual reduction in corporate tax rate from 29 percent to 25 percent and on the other hand increased minimum tax from 1.25 percent to 1.5 percent of turnover.
“These additional taxes coupled with massive depreciation of Pak Rupee adversely affected the cost of vehicles and it forced the OEMs to increase the prices of their vehicles,” the report said, adding that consequently, higher prices of vehicles will likely affect sales volume of auto industry as price hikes will weaken the purchasing power of costumers.
According to the report the Company is endeavoring to improve sales, profitability and diversity in its operations by upgrading the existing products and launching new products.
The company launched the New Alto in June 2019. New Alto harbors contemporary 660cc R-series engine, modern design, spacious interior with great fuel efficiency and Japanese technology.
New Alto received overwhelming response from customers due to its distinguished features.
Macroeconomic indicators of the country are challenging for auto industry. Pak Rupee devaluation, rising raw material prices, increase in interest rate and additional taxes and duties imposed through Federal Budget are major challenges for auto industry.
Variation in forex rates and import duties influenced the pricing of products due to high element of imported components in total cost of products. Your Company has geared up to meet the challenges in future with wide range of quality products at competitive prices through an efficient network of authorized dealers.
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FPCCI demands immediate release of export refunds, duty drawbacks
KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has demanded the government of issuing all outstanding export refunds, rebates and duty drawbacks.
In a statement issued on Tuesday, Engr. Daroo Khan Achakzai, President, FPCCI urged the Advisor to the Prime Minister on Finance & Revenue, Dr. Abdul Hafeez Shaikh to fulfil his commitments made, from time to time, particularly in the Finance Act, 2019 and release export sectors’ all accumulated refund claims including deferred Claims ; Customs Duty Drawback ; DLTL etc., lying pending for payment since long for facilitating and enabling environment to the exporters to overcome their liquidity crunch, meet their export orders well in time; enhance exports and reduce trade deficit so that the export targets as envisaged in the Finance Act, 2019 are met.
Referring to the Finance Act, 2019 the FPCCI Chief recalled that although a provision had been introduced wherein promissory notes would be issued to the Claimants at their option by a newly formed company called the FBR Refund Settlement Company Ltd., but there is a very slow progress in processing of the pending Sales Tax refunds and issuance of RPOs.
The FPCCI Chief appreciated Dr. Abdul Hafeez Shaikh, Advisor to the Prime Minister on Finance & Revenue and FBR for initiating Expeditious Refund System (ERS) for automated payment on generated Refund Payment Orders (RPOs) in the wake of withdrawal of zero-rating on Sales Tax inputs for five export oriented industrial sectors and also appreciated for providing Sales Tax refunds for manufacturing of five export-oriented sector, within 72 hours through Risk Management (RMS), however, lamented for the delay in implementation of these system.
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Car sales plunge by 42pc in July 2019
KARACHI: Car sales have witnessed a sharp decline of 42 percent in July 2019 owing to massive depreciation in local currency and tax measures taken in the budget 2019/2020, analysts said on Monday.
According to statistics released by Pakistan Automobile Manufacturers Association (PAMA), the car sales were 12,482 units in July 2019 as compared with 21,344 units in the same month of the last year.
Industry analysts said that the local currency witnessed sharp decline during current calendar year, which hampered the growth in car sales.
The significant decline was witnessed in cars with engine capacity of 1300CC and above. The sales of this segment fell by 62.6 percent to 3,607 units in July 2019 when compared with 9,659 units in the same month of the last year. The production of this category was also declined to 5,582 units as compared with 9,833 units.
The sales of small cars with engine capacity of 1,000 CC also fell by 53.73 percent during the period under review. The sales of cars under this category fell to 2,051 units in July 2019 as compared with 4,433 units in the same month of the last year.
The sales of cars below 1,000 CC, however, increased to 5,310 units from 4,783 units.
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Karachi traders criticize FBR for not including in consultative committee
Traders associations from Karachi have strongly criticized the Federal Board of Revenue (FBR) for excluding representatives of small traders and shopkeepers from Pakistan’s commercial capital in its newly formed consultative committee on the fixed tax scheme.
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KCCI managing committee elected unopposed for next two years
KARACHI: All candidates of Businessmen Group (BMG) have been elected unopposed for the Managing Committee of Karachi Chamber of Commerce & Industry for the term 2019-2021.
According to details, a total of 32 nominations were received by the Election Commission who all belonged to Businessmen Group, a statement said on Saturday
The nominations papers were scrutinized by the Election Commission, which rejected 10 nomination papers by declaring them invalid whereas 7 candidates withdrew their nomination papers, resulting in unanimous election of the remaining 15 BMG candidates.
Therefore, all 15 BMGIANs were declared successful in KCCI’s Election 2019-21.
Siraj Kassam Teli, Chairman Businessmen Group (BMG) and Former President KCCI, on the occasion, expressed gratitude to Almighty Allah and conveyed thanks and compliments to the Business and Industrial community of Karachi for reposing confidence and trust on Businessmen Group.
Siraj Teli said, “By the grace of Almighty Allah, BMG has been winning all the elections without losing a single seat for the last 22 years and after terribly defeating the opponents in last year’s election with double the votes, BMGIANs have been blessed with an unopposed victory by the Almighty Allah.
He said that 22 years of success is an acknowledgement of the public service by the Businessmen Group which also testifies that overwhelming majority of Business and Industrial Community endorses the policies of BMG because they understand and believe that BMGians are serving them selflessly for their betterment.
BMG Chairman hoped that the newly elected BMGians will make all out efforts in espousing the cause of Business and Industrial Community and to further enhance the status of public service which is the motto of BMG.
The successful BMGians include names of Mohammad Junaid Mundia, Arshad Islam, Agha Shahab Ahmed Khan, Muhammad Altaf Tai, Abdul Samad Shaikh, Atif Jamil ur Rehman, Muhammed Asif, Chaudhry Nasir Abdullah, Ibrahim Mustafa Ahmed Shamsi, Rafiq Muhammad Siddiq, Khurram Ajaz, Ovais Adil, Abdul Rehman Punjwani, Sohail Usman Sheikh and Junaid ur Rehman.
As the Managing Committee members have been unanimously elected, hence no general election for Managing Committee will be held on September 21, 2019 whereas the election of KCCI’s Office Bearers for 2019-20 is scheduled to be held on Thursday, September 26, 2019 wherein BMG’s candidates Agha Shahab Ahmed Khan for President, Arshad Islam for Senior Vice President and Shahid Ismail for Vice President will be elected unanimously as the Managing Committee comprises of all BMGIANs.
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Business community condemns Indian illegal action
KARACHI: The business community has condemned India’s illegal actions, Indian atrocities and violation of rights of Kashmiri people.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), on behalf of entire business community, passed a resolution to condemn India’s illegal actions, Indian atrocities and violation of rights of Kashmiri people.
It said that India has made breach of all international laws.
According to resolutions of UNO, Kashmir is a disputed territory and actions taken presently by India are futile.
“We salute to government and Armed forces for their perseverance and consistent diplomacy in raising the issue,” the FPCCI said.
Business community of Pakistan whole heartedly expresses the solidarity with people of Kashmir and government as well.
Pakistan should send delegations to all international forums for raising the voice against this issue, according to the resolution.
FPCCI should inform to all business communities in the world by sending letters about ongoing Indian atrocities in Kashmir and should apprise to Indian Business community (FICCI), SAARC CCI, ICCIA and Other peace making institutions as well.
Business community of Pakistan appreciated the role of China, Malaysia, Turkey, Saudi Arabia and OIC for condemning the atrocities and oppressions of India with Kasmiri people.