Wednesday, March 23, 2011

Industrialists and FBR Pakistan fail to resolve tax issues

KARACHI, March 21: The manufacturing sector is in stress as negotiations between the Federal Board of Revenue and the industry over the recent amendments withdrawing parts of zero rated status of five major export sectors failed to yield results.

Finance Minister Dr Hafeez Shaikh’s intervention on Sunday to save talks between the two sides did not succeed, sources privy to the meetings told Dawn.

Since the talks remained inconclusive the next round will take place on March 24 in Islamabad, sources said.

The confusion and anomalies arising out of SRO 231(I) 2011 of March 15, has paralysed the entire supply chain of these five export-oriented sectors, business and industry leaders lamented.

FBR chairman Salman Siddique, who arrived in the city last Thursday to hold pre-budget consultative meetings with trade and industry confronted opposition over taxation measures announced.

However, marathon meetings stretching over to several sessions in a day with leaders of FPCCI, KCCI, Kati and other trade bodies remained inclusive up to late Saturday evening.

All hopes were then pinned on Sunday meeting with the finance minister and even FBR chairman during his visit to Korangi Association of Trade and Industry hinted that amicable solution will be reached.

The meeting with Dr Hafeez Shaikh also failed to produce the desired result, sources said.

Industry leaders are of the view that even if the SRO 231(I)/2011 is allowed to become functional in its present form it will result in chaos because without clarifications or removal of ambiguities the supply chain of the industry could not function smoothly.

However, the industry in the first place is not ready to compromise over its zero-rated status and believes the SRO 231 will strip them off billions of rupees, a participant to the meetings told Dawn.

Pakistan Apparel Forum chairman Javed Bilwani said that three fold-increase in raw material prices during last two years had reduced the working capital of the industry.

Therefore, faced with liquidity crunch the industry is not in a position to sustain by taking further burden.

He further said that value-added textile industry suffered heavy losses because of rapid hike in yarn prices during last two years. Mr Bilwani said that ancillary textile industry enters into export contracts ahead of each season and quotes prices on prevalent raw material rates.

He said the 250 to 300 per cent increase in yarn prices caused heavy losses to the value-added industry and only big and medium-sized spinners have earned during this period.

Site Association of Industry chairman Abdul Wahab Lakhani said that goods were piling up in the mills, weaving and processing units have stopped working and goods can not be cleared for exports.

Similarly, he said import consignments were also not being cleared from the customs due this ambiguity and causing heavy demurrage to trade and industry.

Mr Lakhani apprehended that this state of suspension of activities resulting in delay of export shipments will cause irreparable harm to the economy as exporters will not be able to meet their contract schedules.

He urged the prime minister, the finance minister and the chairman FBR to urgently settle the issue and save the industry from a total collapse.


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