KARACHI: The Union of Small and Medium Enterprises (UNISAME) has urged Adviser on Finance Dr Abdul Hafeez Shaikh to grant sales tax exemption at import stage to small and medium enterprises (SMEs), which export more than 80 percent of their production.
[the_ad id=”32940″]It may be mentioned here that government through Finance Bill FY19 has proposed to rescind SRO 1125 thus eliminating the ‘no payment refund’ regime for export oriented industries. According to the proposal, export oriented companies would have to pay 17 percent sales tax on import of raw materials, and this deduction would be refunded subsequently through the central bank.
Thaver said the statements of the government officers that goods were being sold in the local market under the garb of exports without payment of sales tax could be partially correct, “but then all exports are documented and cargo cannot enter the ports without general declaration form”.
He said there was no element of any doubt in determining export of any enterprise as it was all recorded adding the government must develop a system to track local sales and collect sales tax and not burden SME exporters with blockage of funds under refundable sales tax.
The government claims that sales tax is not paid on about 30 percent of goods sold in local market. “If the ability of the government is there to determine the evasion percentage then surely the government can act to collect the ST on the local sales as well”.
Thaver said imposing 17 percent sales tax would prove detrimental to the SME exporters and to resolve the matter the concept of totally export-oriented companies, which is valid in law and also well defined as one who exports 80% of its production, must be exempted from this temporary sales tax deduction and refund procedure causing blockage of funds.
President UNISAME Zulfikar Thaver pointed out that the definition of an SME as per the forthcoming SME policy is mostly going to be an enterprise whose annual turnover is less than Rs1.0 billion. “The present turnover parameter is Rs 800 million but because of the depreciation of the rupee it has become necessary to raise it to Rs1.0 billion. The SME policy 2019 will ascertain the definition”.