Textile exporters facing shortage of raw materials

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KARACHI: The market is witnessing shortage of raw materials for the value-added textile sector, particularly polyester yarn, as importers have stopped clearing their shipments because of the uncertainty regarding new taxes.


Javed Bilwani of Pakistan Hosiery Manufacturers Association (PHMA) said that around 1,200 containers of raw materials were stuck at the port and importers failed to get them cleared, as there had been no notification of reducing five percent withholding tax on raw material imports as committed by the chairman Federal Board of Revenue (FBR).


The export-oriented textile sector is facing shortage of raw materials including yarn, dyes and chemicals etc., while the prices of these items have also surged, exporters said.


The FBR in February end imposed a flat five percent withholding tax on all raw materials import and ended the zero rating regime imposing two percent value-added tax on supply chain.


However, the chairman FBR assured the industrialists that both of these taxes would be reduced to one percent but a notification has yet to be issued subsequently.

Bilwani said that there was an extreme anarchy in Islamabad and there was no order. “The chairman FBR was not following the orders of minister, members FBR were not obeying the chairman while scores of files are being signed and moved without any protocol,” he added.


Zain Bashir of Bedwear Association said that imposing sales tax on the five zero-rated sectors and refund mechanism was clearly a tool for corruption.


He quoted FBR officials as saying that if the refund system was eliminated, there would be no charm in serving at FBR.


Fawad Ejaz of Leather Garments Manufacturers and Exporters Association said that there was a fix rate of bribe for availing refunds, adding that the rate of bribe for income tax refunds was 20 percent of the total claim, 10 percent for sales tax refunds, and five percent for customs rebate. Mehtab Chawla of Towel Manufacturers Association said that government was encouraging export of raw materials and discouraging export of value-added textile products.


The exporters were of the opinion that FBR was favouring the unregistered sectors and was burdening the already documented economy. They said that policies and statutory regulatory orders (SROs) were being framed without the consultation of actual stakeholders.


Bilwani said that the value-added textile export sector would convene a meeting after two days and formulate the strategy forward.


To a question, he said that if the controversial SROs were not withdrawn and zero-rating regime was not restored, they would go for complete strike.


He further said that they might consider shifting their businesses abroad in case their grievances were not redressed.

Courtesy:  The News

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