The Pakistan Apparel Forum (PAF) has urged the Federal Board of Revenue (FBR) to not to treat knitwear and woven garment exporters in the same category with local suppliers of textile goods, while implementing sales tax.
Talking to reporters, PAF chairman Shahzad Azam Khan said that earlier textile exports enjoyed zero-rated status for sales tax, but as FBR detected tax evasion of more than Pk Rs. 25 billion on local sales, FBR levied sales tax of around 15-17 percent. This was however reduced to 2 percent following industry pressure.
However, the levy persuaded the tax collectors to recover the sums from exporters rather than from the real tax evaders, while the local suppliers still managed to evade taxes, Mr. Khan said.
Commenting on outstanding tax refund claims, he said that even refunds of 2010 are still pending, and as large sums of exporters are blocked in this refund regime, this has given rise to liquidity crunch situation.
He apprehended that any rise in sales tax would further burden the exporters, while local suppliers continue to manage to evade taxes. Also, he said sales tax hike would result in rise in fake invoicing.
PAF is a group of five associations representing downstream, value-added textile industry.