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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