The textile industry demands zero status
The textile industry has requested the restoration of zero-rate status, the import of cotton duty-free, the maintenance of the competitive regional energy tariff (RCET), the extension of the long-term financing mechanism (LTFF ) for the entire value chain in the coming year.
A 20-page budget proposal sent to the Department of Commerce unveiled 21 budget proposals for the upcoming fiscal year 2022-23, calling them vital to the sustainable growth of the textile industry and the $30 billion export target. by 2025.
All Pakistan Textile Mills Association (APMTA) has called for a reduction in corporate tax from 29% to 25% and removal of turnover tax of 1.5%. The textile industry has also proposed a current zero duty structure on dyes and chemicals.
The industry has also proposed a 7 percent tariff on the import of polyester staple fibers with total import expenditures of around 20 percent, including anti-dumping duties to be abolished. And he suggested imposing a statutory duty of 15% on the importation of synthetic yarns entering Pakistan’s domestic trade. He also pointed out the duty-free structure on the import of spare parts for the export-oriented industry, arguing that currently the import of major spare parts frequently used in the industry is subject to at a sales tax of 17% and 3% with an income tax of 5.5%.
APTMA has also proposed that import duties on spare parts for power plants should also be zero, arguing that 100% of the textile industry relies on self-generation of electricity. Industry imports spare parts to keep power plants running, with import duties on spare parts for power plants adding to the cost of production.
The textile industry claimed that Pakistan’s exports in the first 10 months of the current financial year rose 26% from the previous year to a record $26.25 billion, of which the majority were textiles (61%). The growth was enabled by the implementation of RCET, an investment of over $5 billion in expansion and the creation of 100 new textile units resulting in an increased export capacity of $500 million per month .
He said textiles have proven time and time again to be a viable and long-term answer to lead the country towards export-led growth and economic stability. “The textile industry is geared towards achieving $26 billion in exports next year, provided policy continuity and government facilitation of exports remain a focus.”
On restoration of zero rate or reduction of GST rate, the textile industry presented its argument saying that the sales tax of Rs 296 billion was collected and refunded on an export volume of $15.4 billion last year. While barely 18 billion rupees of sales tax was levied on domestic sales, this indicates that the total production sold in the domestic market is around 106 billion rupees.
“This translates into the assessment that 90% of production is exported while only 10% is used in the domestic market. This massive sales tax collection and refund cycle works for Rs 18 billion collection and as a result exporters are suffering in the form of delayed, deferred and pending refunds.
Referring to a very recent IMF report, APTMA asserts that the cascading effect of the GST has hurt the competitiveness of Pakistani exporters.
“Due to the implementation of sales tax, Pakistani exporters charge higher rates at the final stage of garment production compared to the Harmonized System and due to this very factor the cost of working capital soared.
This is the main reason why the textile industry wants the restoration of SRO 1125, i.e. a zero score for the entire textile value chain or a reduction in the sales tax rate to 5% in order to satisfy and ensure that Pakistani exports are truly zero-rated from additional working capital. industry requirement.
On cotton import, the industry said that given the sector’s performance and the very achievable textile export target of $30 billion by FY2025, it is essential to increase cotton production or availability from 7.5 million bales to 20 million bales within 3 years.
The costs of storing cotton have increased sevenfold. The trade in cotton has increased from 8,000 rupees per maund to 22,000 rupees per maund, which requires three times as much money for the same amount of cotton. Thus, the industry recommended the import of cotton duty-free for the whole of the following financial year.
The industry has also called for the removal of the 17% sales tax on ginned cotton, which would effectively transfer a better price to farmers.
Citing energy issues, APTMA called for the continuation of RECT with the supply of electricity at 7.5% and gas at 6.5 per MMBTU, arguing that it is vital for continued growth.
And to ensure the liquidity and availability of credit, the industry has requested the extension of the LTFF program to the entire value chain, because the entire value chain requires upgrading and modernization to achieve export goals.
He also requested from the government that the LTFF be provided for direct and indirect exports. The industry has also proposed that the LTFF be extended to building infrastructure costs in the apparel and knitwear sectors.