KARACHI: Karachi Cotton Association(KCA) Chairman Amin Hashwani has expressed concerns over the proposed imposition of Standard Sales Tax on Cotton in the budget 2015-16 with a view to generate about Rs 50 billion revenue.
He said that the KCA has opposed such proposals to impose Sales Tax (ST) on raw cotton, as it would discourage the production and inhibit the smooth flow of exports of cotton. Sales Tax generally is not imposed on Raw Cotton globally, he added.
The Government of Pakistan has set a target for Cotton Production in next fiscal year 2015-16 at 15.49 million bales. With this, there is a strong possibility for Pakistan to export a million bales of raw cotton.
Nearly 80 to 85 percent of the Cotton Crop is exported in the form of Raw Cotton, Cotton Yarn, Cotton Fabrics, Garments and Cotton made-ups and Sales Tax, if levied on Raw Cotton, would be refundable thereon at the export stage.
Cotton is a highly priced commodity and the exporters of raw cotton usually operate on narrow margins. They, therefore, cannot afford to keep substantial borrowed amounts struck-up by way of payment and refund of Sales Tax for 6-7 months, or even longer, as was the case in the past.
This would create serious liquidity problems for the cotton exporters, and eventually cotton exports would adversely suffer and compromise the interests of the cotton growers and ginners.
Keeping in view the importance of export of cotton and cotton products to the country’s economy, the Association strongly urges the authorities concerned not to impose sales tax on raw cotton in the next budget and keep Raw Cotton exempted in order to avoid adverse repercussions for all stakeholders and the general public.
