KARACHI: The representatives of value added textile sector have highlighted anomalies in the SRO 491 which is issued recently by the Federal Board of Revenue (FBR).
According to the representatives of the value added textile sector, as per agreement, it was decided that the textile sector would be zero rated in letter and spirit whereas the SRO interpretation is rather confusing that there will be further tax to be charged from unregistered firms or not? This is indeed confusing and as per previous practice under SRO-509, there was no further tax for registered or unregistered companies. This may please be clarified.
Table-II S. No.1 Clause (iii) the words “excluding supply of finished fabric” must be removed as we agreed zero rating across manufacturing chain and tax would be collected at retail stage while losses at the manufacturing stage would be offset by disallowing refund of packing material.
There is a mention of supplies to outside five zero rated sector @ 17%. This anomaly existed in the previous SRO as well and after a period of about two years a clarification was issued by the FBR and during that period many cases were registered which were cause of great harassment for the textile manufacturers. We would request that the word “registered” be inserted where supplies are made to “other than five zero rated sectors” (e.g. supplies to Police, PIA, etc.) and supplies made to unregistered persons cannot be determined of being made to outside zero rated sectors or inside zero rated sectors as someone who is buying textile ought to be in textile trade only (clarification attached).
List of 128 items has still not been received which would be zero rated. Therefore, it is submitted that caustic soda flakes and maize starch may also be included in that list being the major raw materials for textile sector.
Clarification is also sought on the sales tax on essential spare parts utilized in five zero rated sectors. They also need to be zero rated.
Capital investment, machinery being imported by the five export sectors is subject to 17% sales tax Previously we used to adjust 10% of the sales tax paid in our output liabilities and give 7% insurance guarantee. Now since we are heading towards “no payment no refunds” scenario, this also needs to be brought at zero rate of sales tax. The new condition (xiii) words “import by five sectors” may be included with the word supply.
