The textile exporters have urged the Prime Minister to restore the “zero-rating on sales tax – “No Payment No Refund Regime” by revival of SRO 1125” for the export-oriented sector. The textile exporters said due to the withdrawal of zero-rating, the entire textile industry has suffered a severe setback, with approximately Rs20 billion per month (sales tax input) being shifted from the industry to FBR. “This amount could have been spent on new projects, up gradation and expansion of the industrial base, which in turn could have resulted in increased exports from the country. This was stated by Khawaja Muhammad Usman, Chairman, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association.

He said that it is on record that Federal Board of Revenue (FBR) has failed to timely refund sales tax claims of exporters and take months and new FASTER System is also not working properly and smoothly. Therefore, the government should honour the commitment made by Adviser to PM on Finance Abdul Hafeez Shaikh during last budget that if new system of refund does not work, Government will re-assess.

Due to Covid19, the situation has changed drastically for the industry, as export orders have been cancelled, payments due against LCs delayed, while fresh orders not forthcoming. “This is because of a complete collapse of markets and demand for textiles in Europe and the USA. Circumstances are not expected to return to normalcy even after a year,” he informed.

Khawaja feared that it is not possible to expect the textile value chain to keep paying sales tax in the absence of cash flow, with little chance of being paid for the goods or sales tax by FBR. “Under these circumstances, textile exporters request that the zero-rating on sales tax – “No Payment No Refund Regime” should be restored by revival of SRO 1125.