KARACHI: In an effort to keep aware of the imbalances arising out of the Federal Budget 2014-15 hurting the textile industry of Pakistan, Muhammad Yasin Siddik, Chairman All Pakistan Textile Millers Association (APTMA) has highlighted several anomalies in the Finance Bill 2014.
The Government of Pakistan vide Finance Bill 2014 has imposed 1.0 percent Custom Duty and 5.0 percent sales tax on raw cotton at import stage.
APTMA notes that Pakistan’s textile industry consumes about 16 million bales per annum whereas the total production of cotton in Pakistan is around 13 million bales due to which the spinning sector of Pakistan has to import about 25percent of its consumption requirement majority of which is long staple and contamination free cotton, which is not available in the country.
Imposition of 1.0 percent custom duty and 5.0 percent sales tax on imports would further increase the cost of production as the price of local cotton rise in tandem with the price of imported cotton, thus the impact would not be limited to imported bales only.
APTMA suggests that there should be no custom duty on import of cotton and no sales tax on raw cotton and ginned cotton at import stage.
As per Finance Bill 2014 standard rate of import duty on accessories of plants and machineries under SRO 575 will be charged. APTMA is of the view that the industry imports accessories of plants and machineries as and when require and levy of import duty at standard rate would increase the cost of operation. Therefore, duty on import of plants and machinery should be brought back to the position before Budget 2014–15 i.e. 5.0 percent.
To fetch good price of our products in the international market usage of manmade fibres be encouraged by exempting them from custom duty and other taxes.
In addition to the above, under SRO 567(I)2006 the import duty on Yarn of Viscose Rayon, untwisted or with a twist not exceeding 120 turns per meter (HS Code 5403.3100) is also 5.0 percent. This type of yarn is imported in huge quantities from Indonesia, India, China and Thailand as it falls under this definition. This is clearly an anomaly as it is seriously hurting the domestic industry producing Viscose Yarn, therefore it is suggested that there should be no import duty on Viscose and Acrylic Staple Fibre.
Dryers H.S code 8421.1900 are essential in the process of cloth processing and finishing, these items are bigger in capacities and are precision equipment since moisture level of the cloth needs to be maintained at a fixed percentage. APTMA suggests that since such types of dryers are not manufactured locally and increasing their rate of duty is a disservice to the country’s export.
Coloring material falling under H.S Code 3206.4990 are pigments and coloring material for processing and finishing of the cloth for value addition and the increase in duty from 5percent to 10percent under the garb of threats of misdeclaration is penalizing producers for the inefficiency of Custom’s staff.
It is therefore suggested that the import duty should be brought back to 5.0 percent.
To encourage production of electricity to meet consumption requirement and increase exports, the duty on import of generators above 1100 KVA (HS Code 8502.1390) should be exempted from 5.0 percent custom duty levied vide Finance Bill 2014.
APTMA is of the view that the initiative of the government for expeditious sales tax refund system and fast-track channel for manufacturer-cum-exporter to clear pending sales tax refund upto 30th September 2014 would have no positive affect unless CSTRO to be dispensed with to achieve the proclaimed objective besides providing compensation for delayed refund starting after three months of final submission.
Finance Bill 2014 restricts claiming of input tax adjustment up to 90percent under section 8B, APTMA is of the view that amendment is warranted to add “reduced rate†supply under SRO 1125(I)/2011 as well because under S. No. 7 of SRO. 647(I)/2007 there are certain exceptions from that restriction i.e. persons making more than 50percent zero rated supplies are listed as exclusion.
APTMA suggests that since yarn has no use whatsoever outside the textile sector therefore its exclusion by appropriate amendment in SRO 1125(I)/2011 would safeguard from any frivolous allegation and proceedings in the future.
Textile raw materials, Fabric Waste were imported under H.S. Code 6310. However after issuance of SRO 504(1)12013 dated 12th June 2013 FBR has excluded Chapter 63 completely from the ambit of sales tax @ 2percent by excluding from table – 1 of SRO 1125(1)/2011, as a result Customs is assessing their consignments of HS Code 6310.1000 & 6310.9000 @ 17percent Sales Tax and 5percent Income Tax. As Fabric Waste (HS Code 6310.9000) is also a direct raw material used by spinning mills and not as finished product rather input/raw material for the spinning industry (they are being made to pay 17percent Sales Tax on input) and the yarn so made is chargeable at 2.0 percent Sales Tax which is a clear anomaly.
APTMA suggests that this anomaly should be addressed by including HS Code 6310 in the table – 1 of SRO 1125(1)/2011 dated 31-12-2011.
Recently FBR has issued notices to the many units (electricity providers where sales tax on the electricity bill was not being charged) and has raised income tax liability under section 162 of the Income Tax Ordinance, 2001 though units have discharged their tax liability.
APTMA suggests that the proposed clause to be inserted in Part-IV of the Second Schedule of the Income Tax Ordinance, 2001 either through Finance Bill / Act or through SRO, which may as under (76A).
The provisions of section 235 shall not be applicable to an industrial undertaking where supply of electricity is zero-rated as per condition (xii) of SRO 1125(I)/2011 dated 31.12.2011.â€