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Federal Board of Revenue (FBR) Monday refused to give any relaxation to two major demands of textile chain of Faisalabad i.e. withdrawal/reduction in 17 percent sales tax on export sector and condition of provision of CNIC numbers of unregistered buyers.

A daylong meeting was held between the tax authorities and different sectors from Faisalabad in the presence of four MNAs from the area, besides President Faisalabad Chamber of Commerce and Industry (FCCI) Syed Zia Alumdar Hussain and entire textile chain.

The four MNAs who attended the meeting were Faiz Ullah Kamoka, Sh. Khurram Shahzad, Raza Nasrullah Ghumman and Farrukh Habib. The FBR side led by FBR Chairman Shabbar Zaidi also included a team of tax managers including FBR Member Inland Revenue Policy. However, the MNAs were unable to convince the FBR on the withdrawal/reduction in 17 percent sales tax on local sales of export sector and condition of provision of CNIC numbers of the unregistered buyers.

On the conclusion of the meeting, the participants told Business Recorder that the FBR has shown relaxation on some issues, but remained firm on the issue of 17 percent sales tax on local sales made by the export sectors.

During the meeting, the FBR showed some relaxation on the issue of fixed tax scheme for small shopkeepers. It has been agreed that the small shopkeepers would be exempted from the condition of provision of CNIC numbers and fixed tax would be collected from them. In this regard, three slabs of the shopkeepers have been agreed for payment of monthly tax on fixed basis.As a result of meetings with the chambers/trade bodies, the FBR chairman said that the FBR is ready to define ‘small trader’ in consultation with the trade bodies. The FBR is also ready to introduce a fixed tax scheme for small traders.

However, the condition of the CNIC would not be relaxed for the wholesalers, sources said. The FBR has also assured the exporters of Faisalabad about the payment of their sales tax refunds on fast track basis.

Under the DTRE/manufacturing bond schemes, the FBR has assured the export industry that more items would be added in the list of locally produced items under the said schemes.

Both the sides have also discussed the issue of turnover tax and withholding taxes. The FBR showed its willingness that the rate of turnover tax and withholding tax may be decreased.

Prevailing uncertainty regarding imposition of taxes has brought market activities to a halt, as market sources are of the view that small and medium traders are clueless and totally blank with regard to new tax regime. Major retail chains have some idea how to deal with tax issues while majority of small and medium traders would again be exposed to coercive measures of tax machinery, leading to rampant corruption, they added.

They said it would not be easy for manufacturers to collect 7.5 percent withholding tax from retailers, and manufacturers would not be in a position to carry inventories in case retailers stop procuring goods for another two to three months.

According to tax experts, excise duty has been posed on the basis of electricity load on steel re-rolling mills and new scheme of things suggest that the department has declared that production of one ton capacity would be assumed on electricity consumption of 110 kWh.

Meanwhile, old steel re-rolling mills are producing one ton against the consumption of 160kWh. This discrepancy has not been addressed in the finance bill that would enhance the cost of doing business for such mills, they said.

Also, some other circles are of the view that the situation could be worsened further in case Pak rupee is depreciated further against the US dollar. It would lead to further uncertainty, they feared. They said the export figures are already dwindling down, which are down by 8 percent in dollar terms in June 2019.
They have expressed similar worries about drop in imports; saying that this reduction in imports is due to low consumption. But it would revise upward soon the uncertainty relating to currency devaluation is over. Until then, they said the local manufacturers would increase prices of their products without improving quality.

They said the latest statistics suggest that imports of rubber and tyre are down by 50 percent, which means that local auto market is sluggish. But it would be revived soon local market is stable.

Similarly, they said, the government has recently imposed 50 percent regulatory duty on juices and 60 percent on cheese and exposed consumers to local low quality juice manufacturers. There is no quality control on manufacturing of goods in the country, they pointed out.