KARACHI: Pakistan Yarn Merchants Association (PYMA) has informed the Federal Board of Revenue (FBR) that present turnover tax rate for yarn traders is very high and many traders may resort to shutdown their factories at this high rate.
Farhan Ashrafi, Vice Chairman of Pakistan Yarn Merchants Association(PYMA) & convener FPCCI’s Central Standing Committee on Yarn Trading and Khurram Bharaa, former SVP, have demanded Muhammad Javed Ghani, Chairman Federal Board of Revenue (FBR) to withdraw 1.5 turnover tax imposed on yarn traders and restore the previous rate of 0.1 percent.
“Otherwise, the majority of yarn traders will be forced to close their businesses, which are already badly affected by the Corona epidemic and are facing severe financial crunch.”
A letter to FBR chairman, Farhan Ashrafi informed that PYMA members, who are yarn traders have brought attention towards this important issue, as they were doing business in large volume but unfortunately at nominal rate of profit margin which is 1pc even less.
By virtue of SRO.333 (I) 2001 dated 02.05.2011, the traders of yarn had been subject to turnover tax at concessional rate 0.1pc, which constitutes about 10pc of their margin. Provision of rate of minimum tax 0.1pc was made under clause 45 (A) second schedule to the income tax ordinance 2001.
“Because of some oversight traders of yarn were not included in the purview of minimum tax under the first schedule Part-1 (Division IX) of the Income tax ordinance 2001, which would be the correct approach to treat the levy of concessional rate on yarn traders, as is the case with various other sectors and persons”, they added. Due to this lacuna a state of confusion remains about the levy of tax and frequent changes are made in the rate of turnover tax without consultation with stakeholders.
Khurram Bharaa said that to compound the misery of yarn traders an amendment was made through Finance Act 2020, whereby Yarn Traders have been taken out of the scope of clause 45A (Part IV of 2nd Schedule) and the exemption from application of minimum turnover tax under Section 113 has been withdrawn, which prescribes 1.5pc turnover tax.
Accordingly, the yarn traders are how subject to turnover tax at the rate of 1.5pc, which is way above their actual margin. Consequently, many traders of yarn have to discontinue their business unless the previous rate of 0.1pc is restored.
Farhan Ashrafi asked to FBR chairman to remove the anomaly by insertion of the provision of minimum turnover tax at 0.1pc for the yarn traders in the first schedule Part-1 Division IX (exempting yarn traders from minimum 1.5pc tax under section 113 of income tax ordinance 2001).
He requested Javed Ghani for intervention in the matter will help to rescue the complaint tax-prayers, who are conducting a large volume of trade and sustaining the textile sector of Pakistan.