Exporters in Pakistan want to be paid their sales tax claims in 60 days. They say their money is used as part of a tax revenue collection effort. Consultations with exporters are ongoing on all issues including taxation, tariffs and gas and power pricing. Inputs are being solicited from all stakeholders and a decision will be taken in the coming days.
Pakistan may have a reduced sales tax rate of 7.5 per cent — instead of the standard rate of 17 per cent — across the textile value chain, starting from the spinning sector. The abolition of the zero-rating regime also affects four other industries —surgical instruments, sports goods, carpets and leather goods. Small and medium sized exporters fear the discontinuation of the zero-rating facility will ruin them.
Pakistan is under immense pressure from the International Monetary Fund to remove tax exemptions to increase revenues. The Fund wants Pakistan to withdraw the facility in the forthcoming budget as part of the deal. Both the IMF and Pakistan are of the view that the facility has been misused by the industry to steal sales tax on their domestic sales. The Fund also wants incentives to exporters to be withdrawn and focus be given on boosting exports through the market-driven exchange rate.