Value added textile exporters shutting down production units due to liquidity crunch

KARACHI: The export oriented value added textile sector is going through a severe liquidity crunch and over 40 units have closed, as government contrary to their claims failed to issue sales tax refunds, which only in the last four months piled up to Rs100 billion, Chairman Pakistan Apparel Forum Jawed Bilwani said at a joint press conference of value added textile exporters associations.

On sales tax refund claims have reached Rs350 billion, of which Rs100 billion were accumulated in the last four months since the government ended sales tax zero-rate regime.

“A large number of our members have stopped take export orders, while other associations have also reported similar situation,” Bilwani said adding there would be a sudden and significant decline in exports in the coming months only because of wrong policies of the government.

He said Prime Minister Imran Khan and the entire finance team had made this commitment that exporters would be issued refunds within 72 hours of filing of export Goods Declaration (GD). But, the Federal Board of Revenue (FBR) then came up with a FASTER module to deal with the exporters’ sales tax refunds. “The FASTER module has miserably failed and the authorities are in no mood to release our money.”

Talking about the bonds, government issued against sales tax refunds, Bilwani said these bonds were absolutely useless as no bank was encashing them. “Based on our experience were convinced that the refunds would not be released, which is why we have been demanding ‘no payment no refund’ system.”

“It is seems that Finance Minister Hafeez Sheikh, Revenue Minister Hammad Azhar, Chairman FBR Shabbar Zaidi and Governor SBP Reza Baqir are intentionally discouraging exports to fulfill some kind of IMF’s agenda,” Bilwani alleged.

He said the Pakistan could have taken advantage of trade conflict between China and U.S., “but due to wrong government policies, we missed this opportunity and our competitors like India, Vietnam and Bangladesh made the most of it.”

Chairman Cloth Merchants Association Ahmed Chinoy said the working capital of exporters was stuck up with the government and there was no mechanism in place to release the same. “Due to wrong policies of the government, the export growth is turning negative, which will be reflected on trade balance as well as current account balance.”

The value added textile exporters demanded of the government to re-implement the ‘no payment no refund’ system to facilitate the exporters. They claimed that if the zero-rated regime was restored and industrial units were provided uninterrupted utilities they could affect 10 percent growth in exports every year.

At a separate press conference on Tuesday, President All Pakistan Textile Mills Association Amanullah Qasim said the exporters were facing a brutal liquidity crunch. “If the refunds are not released forthwith, the industry would not be able to continue operations; we would not be able to pay employees and make payments of utility bills this month”.

APTMA demanded of the government to restore the sales tax zero rating regime to save the textile sector from total collapse.

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