According to newspaper reports, Prime Minister Nawaz Sharif has declared zero-rated tax regime for the export sector from July 1 to help overcome liquidity crunch and bring transparency to the payment procedure of refund claims. The Federal Board of Revenue currently charges tax on raw material whether it is imported or local made. However, once it is established that the product made of the raw material has been exported, the tax amount is refunded. A delegation of businessmen met the prime minister and demanded zero-rating regime as the board had introduced the similar policy five years ago for textile, sports, leather,carpet and surgical sectors. The board later withdrew the concession on the ground that some manufacturers were involved in selling products in the domestic market. Exporters regret that Rs 200 million are still lying with the department and a procedure should have to be evolved for disbursement of the claims. The total impact of zero-rating will be up to Rs 10 billion.
Unfortunately, the export sector of the country has been showing bleak performance for the last six months and exports fell in double digits during period. Reportedly some exportersin textile sector are opting for selling their products in the local market which not only affected the volume of exports, but also the government revenues in terms of concessions availed on the raw material. However, the issue of refund claims needs to be resolved through mutual understanding of the government and the business community. Experts believe that the clearance of Rs200 billion will also help reduce the share of taxes to provinces under the divisible pool. Meanwhile, Commerce Minister Khurram Dastgir has claimed that the country’s exportshave crossed $25billionmark for the first time in the economic history of Pakistan. According to him, the decline in exports during 2014-15was due to decline in the global prices ofcotton, leather products and basmati rice.
He says that the government has banned the export of livestock and has earned $210.5 million through export of meat. The government should note that the nation has the right to purchase edibles of their choice in the country. One fails to understand why the best quality fruit, vegetable, rice and other commodities are allowed to be sold at cheap prices in distant lands whereas these commodities can be sold at best prices at home. Instead of focusing on the export of food items, the government should encourage the export of consumer items and finished products. There is also need to promote regional trade rather than banking its exports on the distant countries.
