Government’s Economists & Financial Managers expertise and knowledge have failed due to lack of practical exposure towards the industry and businesses as well as recession caused by pandemic like COVID19. The unrealistic and inconsequential measures taken in the last budget have brought devastating effects on the Value-Added Textile Export Industry with the imposition of 17 percent Sales Tax which brutally injured the export oriented industry destroying its liquidity and has brought it in ICU. To bring back the export industry from ventilator, it is indispensable to surmount their liquidity problem by reinstating SRO1125 to restore GST No Payment No Refund Regime for Five Export Oriented Sectors. Last year the Economic Team totally neglected the demands and proposals of Value-Added Textile Sector whereby exporters expressed strong resistance towards rescinding of SRO1125 which all went deaf on the ears of Government’s economists & financial managers. Country is passing through the most difficult times in its history so do the textile industry of Pakistan. Consequently, alarming state of affairs necessitates the Government to must consult the genuine stakeholders who practically know better about their problems and propose solutions to incorporate in Budget. Hence, the Government must stop experiments on textile industry on the advisory of its Economic Team and accord priority and genuine considerations to the proposals and suggestions of stakeholders Associations of Textile Industry in the budget 2020-21 likely to be announced in next few days. Exporters have appreciated the supportive instance of Advisor Commerce & Textile Razak Dawood for restoration of GST Zero-Rating in meeting held with representatives of textile industry, as he being renowned businessman know well about the problems of commerce and industry, however, exporters have strongly deplored FBR Chairperson for her opposing stance, terming it bureaucratic hurdle, as reported in print media today. Exporters warned that the Government must not repeat the grave mistake of last year and should consider ground realities and act upon the proposals and suggestions of exporters, otherwise, the Government’s plan to enhance exports will be completely shattered. This was stated by Muhammad Jawed Bilwani, Chief Coordinator & Former Chairman of Pakistan Hosiery Manufacturers & Exporters Association (PHMA).
Bilwani articulated that even after severe resentment of exporters, the Government in the last budget imposed 17 percent sales tax which brought detrimental effects on the Value-Added Textile Industry which severely hit their liquidity and precious funds worth billions of rupees were stuck up with the Government. Paying the refunds to exporters against the sales tax collected by the FBR which is liquidity of the exporters is not a realistic relief as Government releases part payments of the exporters while major amount of the sales tax refund are unnecessarily held by Government. During the current financial year, Exporters who have promptly filed their claims of sales tax refunds have not yet received their claims which questions the commitment and refund system of FBR.
Bilwani voiced that the exporters can no more bear the brunt due to inefficiency and shortcomings on part of FBR to achieve revenue targets. The global slowdown in the wake of COVID19 has further added to financial grievances of exporters in shape of loss of business and due to bankruptcy of many global brands whose impact will also fall on the export industry of Pakistan. SME exporters are worst hit due to liquidity crisis and fearing closure as they have no running capital to operate their industries which once closed shall not be revived. The only solution to rescue the export industry, particularly SMEs, and address their liquidity crunch is to revive zero-rated sales-tax regime and reinstate SRO 1125 to provide pragmatic relief to Exporters in this severest ever liquidity crunch of history.
Bilwani expressed that the current volume of Pakistan exports cannot unsurpassed unless the burning liquidity problem being faced by exporters is not addressed by the Government. It is an irony that on one side the Prime Minister and elected representatives have made policy decision for development and enhancement of exports by facilitating and enabling the exporters while on other side the bureaucracy is acting contrary and opposing export-friendly initiatives in the coming budget. Globally, businesses have been slashed upto to 50 percent and leading brands have filed bankruptcies. In this outlook, harsh price war will start worldwide to grab the export orders and the one who will be most competitive will only succeed. Cost of Manufacturing, tariffs of utility, charges of ports etc are already high in the country as compared to regional competing countries. The labour in Pakistan is also, comparatively, less efficient and facing health complications. During the last seven decades, immaculate infrastructure have not been provide in the industrial areas. How the Textile Export Industry, which contributes to the highest share in the national exports, largest foreign exchange earner, major urban employment provider, in the middle of multifarious problems can fight the economic war and compete in the region to maintain and enhance exports? The situation demands immediate deserving considerations by the Prime Minister, in national interest, as textile export industry will face another challenge of further increase of cost of manufacturing due to production below capacity which cannot be afforded by SME Exporters and such situation may compel for closure.
Bilwani apprised that textile exporters are highly annoyed and perturbed as they do business on narrow profit margin while their precious liquidity is stuck up with the Government in shape of sales tax refund claims. In case, GST Zero-Rating is not restored in the coming budget, purportedly, many textile exporters have planned to switch over to any other field which would not a healthy sign as our country needs to encourage more businessmen to get into export business to earn foreign exchange. Those exporters who want to continue their export business shall face another big challenge due to global business slowdown as they will not be able to operate their export industry on full capacity which means their cost of manufacturing will further increase and ultimately situation will compel for closure.
Bilwani alerted the Government to must realize the sensitivity of situation, learn from the trial of last year of imposing 17 GST on textiles which has hampered exports and refrain from further experimenting otherwise a huge number of export industries will close down in next few months which will also negatively affect 40 allied industries associated with the textile export industry. The situation will lead to downfall in exports, foreign exchange earnings and will also cause unemployment. Therefore, in the national interest, the government must revive SRO 1125 and restore zero rating of sales tax “No Payment No Refund Regime” and also accord genuine confirmation to the PHMA’s Budget proposals given to the Government and also published in the media.