End VAT, impose even WHT, remove RD on PFY: PYMA

KARACHI: Pakistan Yarn Merchants Association (PYMA), has asked the Federal Board of Revenue (FBR) to abolish 3pc value added tax on commercial importers at import stage, impose uniform Withholding tax for industrial & commercial importers, and abolish regulatory duty, additional customs duty on polyester filament yarns, and reduction of tax rate on POY, says a Press release.
In this regards, the delegation led by M. Hanif Lakhany, Senior Vice Chairman and Vice Chairman Farhan Ashrafi presented a 7-point agenda in a meeting with Dr. Muhammad Ashfaq Ahmed, member (Inland Revenue – Operations) Federal Board of Revenue. In which important suggestions were made regarding cost reduction and increase in government revenue for the development of textile and allied industries. Aftab Imam, Chief Commissioner (FBR) and Hameed Memon was also present on the occasion while PYMA’s delegation included M. Usman, Khurshid Sheikh, Aslam Motan, Saqib Naseem, Javed Khanani, Khurram Bharara and Salman Ashraf.
Hanif Lakhany and Farhan Ashrafi told Member Inland Revenue that the 3pc value addition sales tax at import stage is quite unreasonable on the import of raw materials because it is impossible to sell a commodity like yarn at gross profit margin of 17-18pc. Their margin is ranging between 2 to 5Pc and this tax is un-necessary burden. It must be withdrawn or at least reduced to 1pc.
They insist for rationalization of withholding tax regime at import stage on all kind of imports for commercial & industrial importers (1pc for capital goods, 2pc for raw materials & 5.5pc on finished goods) i.e. 1pc. Imposition of 2.5pc regulatory duty on polyester filament yarn (5402-3300, 5402-4700), POY (5402-4600) & air covered yarn (5402-6200) is unjustified as PFY is an important raw material for weaving, knitting & home textile. 70pc needs of user industry are met by Imports because local manufacturers only produce basic Spec & are able to meet about 30pc of total demand. Hence, there must be No regulatory duty.
“It would justify the cascading system of polyester value chain. This is essential to provide protection to upstream & downstream participants of cascading system of polyester value chain & if implemented successfully, will result in massive employment & investment opportunities”, PYMA delegation added. It encourages fake invoices resulting in revenue losses to government, when goods are sold to unregistered buyers. We believe this Tax is counterproductive & more creative approach is required to achieve the goal of documentation. On one hand, it deprives the payment of an un-adjustable 17pc direct payment on sales to un-registered persons, and on other hand loss of precious revenue of the government exchequer occurs.
PYMA delegation pointed out anomaly in rate of turn over tax on yarn. Traders of yarn deal in high volume & nominal rate of profit margin. They purchase yarn from spinners & sell to weaving sector with a nominal margin of 1pc or even less. As per SRO – 333(1)/2001 Dated. 02.05.2011, the yarn traders are subject to turn over tax at concessional rate of 0.1pc which constitute about 10pc of their margin. Therefore, FBR should remove the anomaly by insertion of the provision of minimum turnover tax at 0.1pc for yarn traders in the first schedule part-I, Division-IX.
In the meeting, Hanif Lakhany and Farhan Ashrafi mention that there is a major anomaly in polyester yarn cascading chain due to which a major raw material known as polyester partially oriented yarn (POY) is kept same tariff structure as of its finished product polyester draw textured yarn (DTY). Polyester POY is the intermediary raw material produced just for making polyester DTY.
“In Pakistan the Import of POY is almost none as its industry which are called texturizers doesn’t exist due to which DTY is being imported on an average 200 million dollars per year. The policy makers should take steps to reduce duty and other taxes on POY which will help establish DTY factories in the country helping overcome import, create jobs and save unnecessary outflow of foreign exchange”, they opined.
On the occasion, Dr. Muhammad Ashfaq Ahmed, member (Inland Revenue – Operations) Federal Board of Revenue, assured the delegation that the agenda presented by PYMA would consider and would also inform the Ministry of Commerce & Ministry of Finance to include it in the upcoming budget.
FBR official also assured the delegation of his fullest cooperation with the aim of promoting business activities in the country and increasing government revenue.