Govt to withdraw zero-rating status to textiles, carpets & leather

Mr. Fawad Ijaz Khan Chairman Pakistan Leather Garment Manufacturers & Exporters Association (PLGMEA) has stated that the Federal Board of Revenue (FBR) is considering to withdraw Zero-Rating of Sales Tax granted under the Sales Tax regime to five Exporting Industries.

FBR is currently working on new Value-Added Tax law for full implementation of the VAT System as per agreement with the IMF. This new VAT system will replace the existing General Sales Tax (GST) regime.
Mr. Fawad further stated that the Government of Pakistan had zero-rated the Sales Tax on most of the Inputs used in the production of five Export Industries in the Federal Budget of 2005-06. The Zero-Rated industries were Textile, Leather, Sports, Surgical and Carpets.
As per our Government’s agreement with the IMF this new VAT System will have very minimal exemptions and all Trading and Services will be brought under the VAT regime. Besides Zero-Rating of five Exporting Industries the Sales Tax exemptions are covered under the Sixth Schedule of the Sales Tax Act 1990 and items mostly related to Food, Machinery & local supplies are exempted from Sales Tax.
Mr. Fawad stated that prior to 2005-06 there were many cases of over-invoicing of exports with the objective of claiming bogus Sales Tax Refunds. The unscrupulous exporters used to get bogus and flying Sales Tax Invoices and obtain undue Sales Tax Refunds.
Because of this practice the genuine exporters were not able to compete with Exporters who were taking advantage of loopholes in the old system by obtaining bogus and flying Sales Tax Invoices.
Even today several Sales Tax refunds pertaining to period prior to 2005-06 are still pending and FBR is not paying these claims because mostly suppliers of exporters are black-listed by the FBR.
Mr. Fawad stated that FBR was supposed to conduct a Seminar in December 2008 as per agreement with IMF to discuss the VAT regime with stakeholders. But no seminar has taken place so far and neither the stakeholders are consulted.
Mr. Fawad requested the FBR to maintain the Zero-Rated status of the five export industries already exempted from the scope of Sales Tax. If it is imperative to withdraw Zero-Rating then these five industries should be consulted and taken into confidence while formulating any new VAT Law.
Pakistan Leather Garment Manufacturers & Exporters Association

Only spinning sub-sector eligible for loan swap scheme of SBP

The State Bank of Pakistan has provided a reprieve to the export oriented industries; by allowing them a one time opportunity to swap and refinance their outstanding loans availed to import or purchase plant, machinery and equipment with SBP’s Long Term Facility Scheme (LTFS).

As per the circular issued by the Apex bank, only those long term loans will be eligible for the swap, which had been disbursed by the banks between January 2005 and March 2009, but the scheme excludes the highest export revenue generator; textiles and garments.
This one time opportunity scheme will stay open from April 21 to June 30, 2009. Only 50 percent of the loan will be eligible for refinancing while the rest will stay concurrent with the lending banks and also excludes loans which have been declared non-performing under SBP guidelines.
Meanwhile, the SBP released a second circular, which included various sub-sectors from the spinning industries, making them eligible for the LTFS loans. The sub-sectors include doubling, twisting, combing, yarn dyeing, etc.t

Govt releases first tranche under textile policy

The Federal Textile Minister, Rana Muhammad Farooq Saeed Khan, who chaired the 1st meeting of Textile Policy Implementation Liaison Committee, informed that the government has allocated Rs 10 billion for various initiatives under the textile policy for the current fiscal year.
He added by saying that out of the Rs 10 billion, Rs 5 billion had already been released to the State Bank of Pakistan and that he would ensure that the textile policy would be implemented in its true spirit for the development of textile sector in the country.
Dr. Waqar Masood apprised the participants, who represented all the sub-sectors of the textile industry about the progress on implementation of the policy in detail and that notifications regarding important initiatives of the policy have already been issued.

Act to help stakeholders avail benefit of textile policy

A Textile Act has been proposed to be framed, under which only those companies registered with the Federal Ministry of Textiles, will be eligible to receive incentives under the textile policy, which was announced earlier in the year.

The details of the proposed Textile Act will be shared with the textile sector in the next meeting of the committee, as per a decision taken by the Textile Policy Implementation Liaison Committee at its second sitting held yesterday.

Members of the committee discussed various issues with regards to the implementation of the Textile Policy. Ideas and views were shared and different suggestions and recommendations were given by the committee members during the meeting.

The Committee was also informed about the registration process related to yarn export contracts and it was decided to convene a separate meeting, to discuss the issues relating to yarn exports and difficulties faced by the stakeholders.

Duty structure of polyester chain under review

In line with the directives announced in the Textile Policy 2009-2014, the National Tariff Commission (NTC) has initiated an investigation to review the duty structure of the Polyester value chain in the country.

The commission will follow a due process where, it shall carry out an in-depth examination of the case of protection to indigenous industry and also conduct comprehensive analysis of the relevant data.

The textile minister while announcing the textile policy had said that, to promote utilization of man-made fibre and diversify the export mix, monetization of customs duty of PTA is being continued to offset additional cost for the users for the current year.

Federal Cabinet approves Textile Policy

Federal Cabinet Wednesday approved textile policy in a meeting at Prime Minister Secretariat here with Prime Minister Yousuf Raza Gilani in chair. The cabinet in the five-year textile policy has set the textile exports target at 25 billion dollars. The cabinet also decided to take steps to boost the production in textile sector. Prime Minister Gilani also formed a ministerial committee to monitor the enforcement of the textile policy. Prime Minister Syed Yousuf Raza Gilani Wednesday said the Textile Policy aims at incorporating the strategies that are essential to address the challenges confronting this sector on a sustainable basis besides meeting the expectations of the industry. Addressing the Special Cabinet meeting convened to consider the Textile Policy 2009-14 at the PM Secretariat, the Prime Minister said for the first time in the history of the country, the government was adopting a five-year Textile Policy, which would give the vision that was needed for the textile sector.

PAKISTAN: Textile makers demand cotton yarn export ban

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Summary: Workers at a number of textile plants in Pakistan have taken strike action in protest against cotton yarn exports from the country.

Word count: 194

Date: 9 December 2009

Source: Ahmed Abdullah

Textile Industry in Pakistan - An Introduction

The share of textile industry in the economy along with its contribution to exports, employment, foreign exchange earnings, investment and value added makes it the single largest manufacturing sector for Pakistan. It contributes around 8.5 percent to GDP, employs 38 percent of the total manufacturing labor force, and contributes between 60-70 percent to total merchandise exports. Indeed, with exports reaching about $8.6 billion in 2004-05, Pakistan is one of the largest textile exporters in the world.