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Govt withdraws zero-rated status for major exporters

Govt withdraws zero-rated status for major exporters

ISLAMABAD: The PTI government has withdrawn the zero-rated facility, saying that the move will streamline revenue flow and prevent leakages.

While announcing the federal budget for fiscal year 2019-20, the government withdrew the Statutory Regulatory Order (SRO) 1125(I)/2011, which offered zero-rated sales tax on inputs and products of five major export-oriented sectors ie textile, leather, carpets, sports goods and surgical instruments.

Minister of State for Revenue Hammad Azhar during his budget speech said that “the objective behind the move is to resolve the problem of delay in refund payments. The zero-rating created a loophole and the benefit was being availed by unintended beneficiaries and non-exporters.” “The reduced rates for finished goods are also harming revenues.”

In order to streamline revenue flow and prevent leakages, he proposed some measures including scrapping the SRO 1125, thus restoring sales tax at the standard 17% on the five zero-rated sectors.

He also said the rate of sales tax on local supplies of finished articles of textile, leather and finished fabrics may be raised to 17%. However, the retailers opting for real-time reporting would be given a relaxation and will be charged 15% tax, he added.

He stressed that zero-rating of utilities would be withdrawn and the refund of sales tax to these sectors would be automated, thus ensuring that the tax paid on inputs was immediately refunded. “Refund Payment Orders (RPOs) will be immediately sent to the State Bank for payment,” he said. He proposed a reduced tax rate of 10% on ginned cotton, which is presently exempted.

“This decision is against the textile policy which the PTI government presented before general elections,” said Pakistan Hosiery Manufacturers and Exporters Association (PHMA) Chairman Jawed Bilwani while criticising the budget. “Exporters reject the government’s decision on withdrawing the SRO 1125.”