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Yarn merchants demand duty, tax incentives for cost reduction

KARACHI: Pakistan Yarn Merchants Association (PYMA) has demanded incentives in rates of duty and taxes in order to reduce the cost of production, according to a statement issued on Thursday.

The issues were raised at a meeting of yarn merchants with Member Inland Revenue (Operations) Federal Board of Revenue (FBR) held last week.

The office bearers of Pakistan Yarn Merchants Association (PYMA) demanded the Member of abolishing 3 percent value added tax on commercial importers at import stage, impose uniform Withholding tax for industrial & commercial importers, and abolish regulatory duty, additional customs duty on polyester filament yarns, and reduction of tax rate on POY.

Member Inland Revenue was informed that the 3 percent value addition sales tax at import stage is quite unreasonable on the import of raw materials because it is impossible to sell a commodity like yarn at gross profit margin of 17–18 percent. Their margin is ranging between 2 to 5 percent and this tax is un-necessary burden. It must be withdrawn or at least reduced to 1 percent.

They insist for rationalization of withholding tax regime at import stage on all kind of imports for commercial & industrial importers (1 percent for capital goods, 2 percent for raw materials and 5.5 percent on finished goods) i.e. 1 percent.

Imposition of 2.5pc regulatory duty on polyester filament yarn (5402-3300, 5402-4700), POY (5402-4600) & air covered yarn (5402-6200) is unjustified as PFY is an important raw material for weaving, knitting & home textile.

“It would justify the cascading system of polyester value chain. This is essential to provide protection to upstream & downstream participants of cascading system of polyester value chain & if implemented successfully, will result in massive employment & investment opportunities”, PYMA delegation added.

It encourages fake invoices resulting in revenue losses to government, when goods are sold to unregistered buyers. We believe this tax is counterproductive & more creative approach is required to achieve the goal of documentation.

On one hand, it deprives the payment of an un-adjustable 17 percent direct payment on sales to un-registered persons, and on other hand loss of precious revenue of the government exchequer occurs.

PYMA delegation pointed out anomaly in rate of turn over tax on yarn. Traders of yarn deal in high volume & nominal rate of profit margin. They purchase yarn from spinners & sell to weaving sector with a nominal margin of 1pc or even less.

As per SRO – 333(1)/2001 Dated. 02.05.2011, the yarn traders are subject to turn over tax at concessional rate of 0.1 percent which constitute about 10pc of their margin.

Therefore, FBR should remove the anomaly by insertion of the provision of minimum turnover tax at 0.1pc for yarn traders in the first schedule part–I, Division–IX.

On the occasion, Dr. Muhammad Ashfaq Ahmed, member (Inland Revenue – Operations) Federal Board of Revenue, assured the delegation that the agenda presented by PYMA would consider and would also inform the Ministry of Commerce & Ministry of Finance to include it in the upcoming budget.

FBR official also assured the delegation of his fullest cooperation with the aim of promoting business activities in the country and increasing government revenue.