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Textile sector unanimously reject withdrawal of zero rate regime under RGST
Dec '10
Leading textile associations have rejected unanimously withdrawal of zero rating regime for textile industry under the Reformed General Sales Tax (RGST). Prominent sitting and former Chairmen from APTMA, Pakistan Cotton Forum, All Pakistan Bedwear Manufactures & Exporters Association, Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA), Pakistan Hosiery Manufacturers Association (PHMA), Towel Manufacturers Association (TMA), Karachi Cotton Association (KCA), Silk Manufacturers Association (SMA) and All Pakistan Textile Processing Mills association (APTMA) backed each other at a meeting held at the APTMA offices on pursuing the government not withdraw zero rating regime from export-oriented textile industry.

Chairman APTMA Gohar Ejaz briefed media about the meeting deliberations. He said he would convey to the National Assembly Standing Committee on Finance Chairperson Fauzia Wahab in his December 1 meeting in Islamabad that textile industry was not against the RGST but to the mechanism of tax collection, resulting adverse implications.

He said the government was set to build refunds stuck up to the tune of Rs400 billion from spinners, weaver, processors and value added exporters in order to collect an estimated Rs25 billion consumption tax.

He said textile industry was not opposing tax collection under the RGST but the mechanism, which is likely to disturb $12 billion textile industry altogether. He said the zero rating regime must be maintained until the finished textile goods and consumption tax should be imposed only on domestic sales.

Former Chairman PHMA Shehzad Azam said the government was simply trying to make its balance sheet attractive through collecting RGST from export-laden textile industry. According to him, the World Bank officials had stated that the FBR would ensure refund in four weeks, which the department has failed to prove till date. He said any tax dictation from the IMF and the World Bank is unacceptable, especially when such experience has already failed.

Chairman TMA Tahir Jehangir said such exercise has already resulted into massive corruption therefore they declared textile as zero rating. He feared opening up of another door to corruption with resumption of GST from textile industry.

He said sales tax should be levied only on goods cleared for local sales for end consumption and exporting units and its supply chain be given exemption from 15 percent GST, as financial crunch is already in place and it is difficult to sustain further liquidity crunch. It would be a crippling blow to the textile industry, he added.
Seth Akber, Chairman PCF said cotton farmers would be likely to get hurt with the withdrawal of this regime from the textile industry.

He said the growers have for the first time got beyond imagination prices for their cotton crop but any revision of already experienced system would lead to abyss. He termed the RGST asold wine in new bottle and added that it wouldn't work at all. He feared the grower will be discouraged to grow more cotton under the RGST regime.

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