KARACHI: Textile industry has recommended Federal Board of Revenue (FBR) to continue the sales tax zero-rating for export sector in the upcoming budget 2017-18 by removing further tax at two percent.
The textile industry in its budget proposals 2017-18, said that one of the major demand of the industry was met last year by zero-rating the local supply of input goods of the textile sector, whether supplied to the registered person or unregistered person, as being specialized industrial raw material these good had no chance of being used outside the textile sector.
Though, further tax on supplies to the unregistered persons of these input goods was intended by the FBR through clarification yet the same was disapproved by the courts.
It is suggested that the government should continue with the zero rating as well as with non-levy of further tax on supplies of raw materials to the unregistered persons.
Rather, it would be better to provide exclusion from further tax by adding textile raw material in the exclusion SRO 648 (I)/2013.the condition (xiii) of SRO 1125(I)/2011 regarding supply of furnace oil, diesel oil, and coal to be suitably amended so that the registered manufacturer having their electricity and or gas zero-rated through STGO gets the same facility without any further formality.
In order to get rid of collecting tax and then paying back in refund, it will be in fitness of things if government continues with zero rating presently provided under SRO 1125(I)/2011.
Rather the regime ought to be strengthened by including the zero-rating by the supplier of furnace oil, diesel oil and coal to those registered manufacturers whose purchase of electricity and /or gas has been zero-rated by the Board through STGO. There is no rationale for obtaining approval on periodic basis.
Before the zero rating in January, 2016 the supply of yarn was subject to sale tax at 3 percent which was to be refunded on exports. The refund relating to those period amounts to more than Rs30 billion. This amount should immediately be released. This will help in reducing the liquidity problem of exporters.
Currently, FBR capture sale tax returns subsequent to verifying sales and purchases. This is prudent steps. However, simultaneously the exporters are asked to submit the refund claims on CD (RCPS). Such mechanism might have served some purpose, when returns were accepted without any verification.
It may also be relevant to point out that the exporters have the facility to file claim electronically in the Expeditious Refund System (ERS) and others are to file it manually.
