KARACHI, Feb 25: Textile industry has taken strong exception to proposed imposition of two per cent sales tax at each stage of value-addition and feels that it would prove fatal.

The textile industry leaders resented that such decisions were being taken without taking stakeholders on board.

They were also critical of FBR chairman’s assertion that the textile despite being a zero-rated sector has obtained sales tax refund to the tune of Rs12 billion as compared to Rs2 billion gross sales tax collection from the sector.

Refuting FBR chairman Ali Arshad Hakeem’s observation, Mohammad Jawed Bilwani, chairman, Pakistan Hosiery Manufacturers Association (PHMA), said that as a matter of fact Rs12 billion refund was paid to the industry against packing material while Rs2 billion was of the unregistered sector and not the registered textile export sector.

He was surprised that the government instead of entering into consultative sessions with the trade and industry for the next budget was taking such measures wherein new taxes were being imposed.

The PHMA chief said that profit margin of the textile sector was not more than three to four per cent due to ever-rising tariffs of all essential utilities, electricity, gas and water, but the government was bent upon overburdening the sector which may bring it to a total collapse.

He said that if FBR wants to impose any new tax to fill the revenue gap, it should tax the retail sector which can help generate huge revenue without any issue of refund.

Pakistan Knitwear and Sweaters Exporters Association chairman Rafiq Godial said that the government should understand that by overburdening the textile sector, exporters would be directly affected.

He said that the textile industry was already facing numerous issues, like high cost of doing business, frequent shutdowns and strike calls, with ever deteriorating law and order situation. Mr Godial further stated that export trade means meeting of timelines of foreign buyers who are keen to have timely delivery of their orders to meet seasonal sales in the world market.

However, in the current situation, it had become impossible for exporter to meet the deadlines.

If there was a need to generate revenue, he said, many businesses and industries which are involved in production of luxury goods, and are having robust growth, be taxed.

Sheikh Shafique Rafique, chairman, Pakistan Readymade Garments Manufacturers and Exporters Association (Pregmea), said that the FBR should come up with a policy framework wherein manufacturing activity should not be taxed directly and only consumption be targeted.

He urged the Finance Minister Saleem Mandivwala to convene a meeting of genuine stakeholders, particularly of value-added textile sector, to review taxation policy so that the government while maximising tax collection should spare manufacturing activity of all sorts.