PkRevenue.com – In a united front against the proposed tax changes in the upcoming budget for 2024-25, the value-added textile exporters have rejected the introduction of a minimum tax regime that includes extensive scrutiny.
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Textile exporters urge allowing cotton import from India
KARACHI: Textile exporters have urged the government to allow import of cotton and cotton yarn from India and other countries through land routes.
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Value-added textile demands allowing cotton yarn import from India
KARACHI: Value-added textile sector on Tuesday demanded the government of allowing cotton yarn from India as it was done in case of pharmaceuticals.
In an online meeting with Abdul Razak Dawood, Advisor to Prime Minister on Commerce & Textile, the representatives of value added textile sector said that without discrimination, in order to overcome the scarcity of yarn in the Pakistan, as the government previously allowed for import of pharmaceuticals, “it is also most crucial to allow import of cotton yarn from neighbouring country through Wagah border as the quality yarn is not available and prices are also multiplied to manifolds.”
Wagah is a union council of Pakistan bordering with India.
Allowing import of cotton yarn was demanded by Value-Added Textile Associations – Zubair Motiwala, Chairman, Council of All Pakistan Textile Associations (CAPTA), Muhammad Jawed Bilwani, Chairman, Pakistan Apparel Forum, Riaz Ahmed, Central Chairman Pakistan Hosiery & Manufacturers Exporters Association, Tariq Munir, Zonal Chairman (SZ), Farukh Iqbal, Sr Vice Chairman PHMA (NZ), Ijaz Khokhar, Former Chairman, Pakistan Readymade Garments Manufacturers & Exporters Association, Haroon Shamsi, Former Chairman, Towel Manufacturers Association and Zia Alamdar, Former President, Faisalabad Chamber of Commerce & Industry in an online meeting held with Abdul Razak Dawood, Advisor to Prime Minister on Commerce & Textile.
The council raised: “The government, through Presidential Ordinance, must abolish all duties and taxes and allow duty free import of Cotton yarn which is the raw material of value-added textile sector in order to sustain and achieve milestone in enhancement of exports.
“The government should also place ban on export of cotton yarn of 30 single or below till June 2021 ensuring availability of quality yarn to facilitate export sector to complete their export orders without hassle and unrest.
“In view of shortage of wheat and sugar, the Government had allowed to import wheat and sugar and also banned their export to cater the national needs.”
Likewise, anti-dumping duties on goods imported meant for re-export by Export Oriented Units and Manufacturing Bond should also be abolished. Moreover, to turn vision of the Prime Minister for enhancement of exports into reality and to control the declining trend in exports, the government should freeze the special tariffs of 7.5 cents for electricity and $ 6.5 for gas for at least next three years and provide uninterrupted and quality electricity and gas providing level playing field and competitive environment to enhance their export efficiency and materialize all exports orders.”
The value-added textile sector has emphasized that the vision of Prime Minister Imran Khan for industrialization, increasing exports, creating trade surplus, generation of employment opportunities and earning precious foreign exchange shall become possible only when raw material – cotton yarn and uninterrupted supply of utilities is ensured on special tariffs approved for export-oriented industries. The Value-added Textile Exporters are highly worried over the unavailability of cotton yarn – which is basic raw material in the local market despite huge export orders are available with the value added textile.
On the demand of textile exporters, the government, previously, considered removing the Regulatory Duty only. Sense of severe unrest and uncertainty prevails as exporters feel it “discriminatory” because in the case of cotton, the government had allowed complete duty-free import.
Removal of Regulatory Duty has supported the value-added textile sector to some extent, whereas, the situation necessitates and demands to also remove the Customs Duty to fully support the value-added textile sector to complete their export orders which they have materialized for the next several months.
The gravity of situation demands the government to immediately abolish Customs duty on import of cotton yarn by passing through a Presidential Ordinance, in the interest of export and the country.
The Associations also expressed severe concern on the recent announcement of the Federal Government regarding discontinuation of gas to the industrial captive power plants which depicted a bleak picture in eyes of foreign buyers across the globe, particularly of US & EU who become doubtful as to how the Pakistani exporters will complete export orders?
The buyers have also communicated that since there will be no gas and orders cannot be completed, therefore, they are thinking to divert the export orders given to Pakistani exporters to other countries.
The Associations’ representatives lamented that 225 CPPs of Industries in Sindh were closed abruptly. The Government later clarified that the announcement was related to energy efficiency benchmark.
The Associations reacted that the CPPs of industries were more efficient and productive as compared to CPPs of utility companies. More than a decade back the export industries invested in CPPs on the offer of the then Government when the utility companies were failed to provide required quality electricity and there were load-shedding problems.
Now the sitting Government is asking to close the CPPs and take electricity from utility companies which is totally contradictory.
The Associations stated that the utility companies neither have the required quantum of electricity to supply to industries nor have the adequate infrastructure available for the purpose, thus, the Government must refrain from such unwise move which will bring disastrous effects on industries and exports.
Abdul Razak Dawood, Advisor to Prime Minister on Commerce & Textile gave patient hearing to the issues and problems confronting to the Value-Added Textile Industry and assured that he will take up the matter with the Prime Minister and Cabinet and the Government will consider and resolve some of the issued highlighted in the meeting.
Value Added Textile Export Industry contributes around 62 percent in total exports, provide highest urban employment particularly to female workforce and supports approx. 40 allied industries.
In view of its significant importance in the economy and free market mechanism, the Government must consider the appeal of value-added textile sector for duty-free import of cotton yarn to ensure availability of cotton yarn of good quality.
Such state of affairs demands the Government to remove 5 percent custom duty on import of 30 single yarn and below count and the exporters, manufacturers and importers, shall be given full liberty to import yarn from any country till the scarcity of cotton yarn is controlled and required quantity of yarn is available in abundance in all Pakistani markets to complete the export order smoothly.
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Exporters demand customs duty waiver on cotton yarn
KARACHI: Value-added textile exporters on Tuesday demanded the government of abolishing customs duty on import of cotton yarn to support the industry and ensure timely completion of export orders.
“The gravity of situation demands the government to immediately abolish customs duty on import of cotton yarn either by passing through a Presidential Ordinance or by an immediate act of Parliament, in the interest of export and the country,” said Muhammad Jawed Bilwani, Chairman, Pakistan Apparel Forum & Former Central Chairman, Pakistan Hosiery Manufacturers & Exporters Association (PHMA) in a statement.
The value-added textile exporters are highly perturbed over the unavailability of cotton yarn – which is basic raw material in the local market despite huge export orders are available with the value added textile.
However, where cotton yarn is available is of sub-standard quality owing to which exporters are unable to meet export commitment. To ensure availability of cotton yarn, PHMA had earlier demanded the Government to allow duty-free import of cotton yarn to facilitate Value-added textile export sector to achieve milestone in exports as cotton yarn was unavailable in the local market.
Nevertheless, the government considered removing the Regulatory Duty only. Sense of severe unrest and uncertainty prevails as exporters feel it “discriminatory” because in the case of cotton, the Government had allowed complete duty-free import.
Removal of regulatory duty has supported the value-added textile sector to some extent, whereas, the situation necessitates and demands to also remove the customs duty to fully support the value-added textile sector to complete their export orders which they have materialized for the next several months.
The government must realize the sensitivity of the matter to support the value-added textile exports as due to unavailability of cotton yarn, the prices of cotton yarn of 30/1 were 235 per pound during the month of October 2020 and now in January 2021 were 260 per pound there has been an increase in the yarn rates by 9.62 percent which has also brought an upshot in the cost of manufacturing pushing the exporters towards unviable situation and un-competitiveness.
The gravity of situation demands the government to immediately abolish customs duty on import of cotton yarn either by passing through a Presidential Ordinance or by an immediate act of Parliament, in the interest of export and the country.
The government must accord high priority to the matter in order to turn its policy to enhance export into reality. The exporters profoundly appreciate the government for streamlining and fully automating the sales tax refunds which have been working efficiently and delivering 99 percent result.
While the customs rebate disbursement has also been done rapidly with deliverance of 99 percent. The exporters also request the government to also streamline and automate the system for disbursement of DLTL/ DDT which should be electronically transferred to the exporters with export proceeds.
Value Added Textile Export Industry which contributes around 62 percent in total exports, provides highest urban employment particularly to female workforce and supports approximate 40 allied industries.
In view of its significant importance in the economy and free market mechanism, the government must consider the appeal of the value-added textile sector for duty-free import of cotton yarn to ensure availability of cotton yarn of good quality.
Such state of affairs demands the government to remove 5 percent custom duty on import of 32 single yarn and below count and the exporters, manufacturers and importers, shall be given full liberty to import yarn from any country till the scarcity of cotton yarn is controlled and required quantity of yarn is available in abundance in all Pakistani markets to complete the export order smoothly.
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Textile value added sector demands restoration of sales tax zero-rate regime
KARACHI: Exporters of textile value added sector have demanded restoration of zero-rated sales tax regime as despite assurance of 72-hour payment of refunds huge liquidity was stuck up with the tax authority.
The Value Added Textile Exports Associations demand the government for immediate restoration of Zero Rating – No Payment No Refund System, release payments pending refund claims of sales tax, tariffs of gas needs to be reduced, tariff of power recently enhanced without any justification and FAC imposed retrospectively be withdrawn with immediate effect, industrial water tariff in Karachi must be rationalized and its supply must be made assured, weekly holiday of gas must be done away with and utilities be supplied on 365 days basis.
The exporters agitated against imposition of 17 percent sales tax on export oriented sectors, however, the government one-sidedly imposed the sales tax despite of strong disagreement of the export sector.
The Advisor to Prime Minister on Finance promised that the refunds will not get stuck up whereby he and his team have made a commitment that after passing of budget, his team will hold meetings with exporters and devise an automated system like in Bangladesh or China.
Through the automated system, exporters will get a major amount from bank or the State Bank and would not be dependent on the FBR.
Advisor Finance promised that if the new refund system will not work, the govt. will re-assess in 3-6 month period.
Since more than 7 months have been passed and the FBR FASTER system has failed for speedy refunds, therefore, the Govt. should honour their commitment and restore zero rating – No Payment No Refund Regime for the export sectors.
Exporters feared that their precious liquidity taken away by the government in shape of sales tax worth billion of rupees shall be completely stuck up and refunds shall be excessively delayed because the FBR has also failed to achieve its revenue collection target.
It is an alarming situation that Chairman FBR at the time of budget has left due to his acute illness while, as learned, Member IR (Operations) is also not available at FBR Islamabad.
If the government will not realize the gravity of situation and exporters refunds are not released on war footing basis, the textile exports will completely collapse leading to enormous flight of capital and massive lay-offs and uncontrolled unemployment.
The government rescinded SRO 1125 and discontinued zero rating status from export oriented sectors including textile and imposed 17 percent sales tax with a plan target in Budget 2019-20 to collect Rs185 billion from the local market for the whole fiscal year.
The government claimed that local textile sales is around Rs1200 billion per annum. However Govt. collected only Rs23.6 billion in the first five months (Jul-Nov 2019) through domestic front and Rs32.3 billion at import stage (as these imports are mostly by exporters hence it is refunded).
For mere Rs50 billion the entire sector has been put into deep cash flow crisis.
One fails to understand the rational behind this as there figures presented at the time of budget have been proven incorrect at that time also we tried to correct them that local sales are only 20 percent and 80 percent is the exports and by imposing the sales tax, the export sector would be severely hit and that has proven to be right today and exports are suffering heavily in the scenario of cash flow crunch coupled with very high interest rate.
This was voiced by the Chairmen of the Value Added Textile Exports Associations at Karachi Press Club today in a joint press conference followed by peaceful protest against the issues of withheld refund payments, high tariffs of Gas, Electricity, Water and load shedding of gas.
Zubair Motiwala, Chairman, Council of All Pakistan Textile Mills Associations; Jawed Bilwani, Chairman, Pakistan Apparel Forum; Amanullah Kassim, Central Chairman, All Pakistan Textile Mills Association, Asif Inam, Chairman (SZ), All Pakistan Textile Mills Association, Yasin Sadik, Former Chairman, All Pakistan Textile Mills Association; Aslam Karsaz, Chairman, Pakistan Hosiery Manufacturers & Exporters Association, Shaikh Shafiq, Central Chairman, Pakistan Readymade Garment Manufacturers & Exporter Association; Kamran Chandna, Chairman, Pakistan Knitwear and Sweater Exporters Association; Haroon Shamsi, Chairman, Towel Manufacturers Association of Pakistan; Khawaja M. Usman, Chairman, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association Abdus Samad, Former Chairman, Pakistan Cloth Merchants Association, Shaheen Merchant, Chairman, Pakistan Denim Manufacturers & Exporters Association; Amjad Jalil, Chairman, All Pakistan Textile Processing Mills Association; Amin Allana, Chairman, All Pakistan Bedsheets & Upholstery Manufacturers Association participated in the Joint Press Conference and peaceful protest supporting by a large number of textile exporters.
The Value Added Textile Export Sector was of the view that the Govt. has failed to refund sales tax claims under FASTER System of textile exporters as per commitment, to refund claim amount in 72 hours, contrarily the government has not paid exporters’ claims for the last seven months.
Approx. Rs100 billion of textile exporters liquidity held up under FASTER Refund System in last 7 months and total Rs210 billion are withheld with the government payment timeline for payment of Customs Rebate claims which previously was reduced to 7 months has again been prolong to a period of 13 months.
However, the government also committed that Customs Rebate, DLTL claims will also be paid electronically along with export proceeds.
Reportedly, hundreds of exporters SMEs have stopped their production owing to liquidity problems who have not received their sales tax refund claims for last seven months and due to high rates of utilities shall be compelled for closure if their sales tax refunds are not released on immediate basis and tariffs are not rationalized to facilitate them to get new orders and resume production.
In next 2-3 months Approx. 8-10 percent textile exports may face decline, the Small and Medium Export Industries are in total dire straits and demand immediate attention of the Government for their survival.
FBR harsh policies will completely destroy value added textile export sector if the system is not withdrawn. Government should declare an emergency situation to control the downfall of GDP, rise of inflation and downfall of exports and take all necessary steps to release payments of all pending refund payments of exporters forthwith and restore zero rating of sales tax – no payment no refund regime and freeze the tariff at its previous position in the larger national interest.
Value Added Textile Export Sector further demanded to bring down tariffs of gas, power and water and supply utilities 365 days.
One crisis after another is seriously mauling the Value Added Textile Export Sector and the recent announcements of another increase in electricity and Gas charges would render this vital export sector to be become most uncompetitive in the international market.
It is an irony and most surprising that on one side the Government wants to reduce the cost of manufacturing of export oriented sectors due to stiff competition from regional countries and on other side increasing utility tariffs.
This proposed increase in electricity and gas tariff along with several other adverse factors would render the cost of doing business of the Value Added Textile Sector uncompetitive in the International Market against competitors such as Bangladesh, India, Srilanka, Vietnam, China, and other competing countries whose cost of doing business is much lower owing to several variance in input costs as compared to Pakistan.
Ministry of Energy (Petroleum Division) has moved Summary to the ECC of the Cabinet to raise gas tariff of zero-rated industry and their captive power to $6.5/MMBTU (Rs1,000/MMBTU) from the previous tariff of Rs786/MMBTU, apparently to give cross-subsidy to other sectors.
Relevant to mention that the Ministry of Commerce had assured the export industry that Rs600/MMBTU would last for a period of three years while, previously, raising the tariff from Rs488 to Rs600 including GIDC. However, after appreciation of dollar, the tariff of Rs786/MMBTU was imposed which is itself much higher than our main competitor Bangladesh and we can prove if cross subsidies are removed from gas tariff and we pay the actual WACOG (Weighted Average Cost of Gas) our price would be lower than Rs600/MMBTU.
It is astonishing that Govt. is charging subsidy to be given to other sectors from Export Oriented Sector and crippling the sector whereas it is the domain of Govt. to allocate the same from budget and If two more fertilizer plants of the size of Engro come into Pakistan then what would happened to our tariff. It would probably enhance with another 50 percent.
It is an irony that Textile Export Industries of Karachi which contribute 54 percent in the national’s textile exports is starving for the most essential Raw Material – indigenous gas due to weekly gas closures and low gas pressure which has brought negative effects on the export consignments.
The export production has crippled and industries remained without gas leading to exporters failure to meet their export commitments in time.
The textile export sector has been compelled to work only six-days a week while in regional countries and worldwide the competing export industries operative 24/7. Percentage wise impact of One day Gas Holiday every Sunday is equal to 14.28 percent (100/7) which means there is 14.28 percent production loss every week due to Gas Holiday on every Sunday and its impact will be 8 percent on total national exports.
To safeguard textile exports, it is crucial to supply continuous and uninterrupted Gas to the Export Oriented Industries of Sindh / Balochistan. New Industrial Gas Connections should be given to industries of Sindh / Balochistan (as per Article 158 of the Constitution) at prevailing rates on SOS basis, Moratorium on new connections must be done away with.
Previously Ministry of Energy, Power Division vide Notification SRO12(i)/2019 dated 1st January, 2019 whereby the Power Division has revised the tariff for export oriented sectors to net 7.5 cents / kwh including all charges to facilitate the exporters for enhancement of exports and earn precious foreign exchange for our beloved country but this was not implemented in Karachi for the reasons best known to Federal Govt.
Water tariff in Karachi is also most exorbitant and three times higher than the water tariff of other cities of Pakistan. Therefore, water tariff should be brought down at par with the other cities. The export orders to Pakistan has been curtailed owing to lack of CETPs conformance.
The Federal Govt. should take the ownership and construct the Five Combined Effluent Treatment Plants in the industrial areas of Karachi to protect and facilitate the 54 percent textile exporting industries of Karachi.
It is imperative that Tariff for Electricity and Gas should be fixed on yearly basis for the Export Oriented Sectors and Priority should be given only to these sector as the Export Sectors have to make commitments for 6 months in advance and such frequent increase all the year round in the electricity and gas tariffs jeopardizes their entire planning and they suffer huge losses to keep up commitments to their foreign buyers.
The associations appealed to the Prime Minister to intervene in the matter in the best interest of our exports and foreign exchange earnings and demands a fair Gas tariff which is the actual cost of Gas minus cross-subsides.
He further appealed that announced power tariff of 7.5 cents/kwh including all charges should be implemented in inclusive of all charges across Pakistan including Karachi.
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Sales tax refund promises annoy value added textile industry
KARACHI: The value added textile industry has expressed its displeasure over government’s repeated promises of clearing sales tax refunds.
The government made promises for the past several months to clearing pending sales tax refunds but failed to honor, said Jawed Bilwani, Chief Coordinator of the Value Added Textile Export Sector said on Tuesday in a joint press conference at Pakistan Hosiery Manufacturers Association (PHMA) House.
He said that the value added industry was facing serious liquidity problems due to stuck up refunds.
The prime minister assured the business community to resolve the issue of refunds completely through a new mechanism. Besides, Hafeez Shaikh, Advisor to Prime Minister on Finance and Revenue and Syed Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR) also promised the refunds would be issued when exporters would file their goods declarations.
Instead tall claims the situation has further aggravated, Bilwani said.
He said that around 40 percent of the industry was facing immense liquidity problems. “This resulted in closure of factories,” he added.
For the past pending sales tax refunds, the government issued bonds, which were never encahsed, he said.
For the past four months the government was repeatedly assuring to resolve the issue, he said, adding that nothing was done in this regard.
He said that on the one side the government was endeavoring to increase the exports but on the other side it was silent on the issue of refunds.