Over Rs600m leather sector pending refunds create liquidity crunch

LAHORE - The leather industry’s outstanding refunds of last fiscal year (2012-13) worth over Rs600 million have been pending before different revenue collecting agencies for the last several months. 

The leather industry representatives have questioned that how the FBR would handle the cases after ending zero rating regime and piling up more cases of refund claims when about Rs600 million of just PTA members’ refunds of sales tax and duty drawback regime are already stuck with the government departments, creating liquidity crunch and hampering the export growth.  “Almost 50 per cent leather industry related exporters have complained of stuck up of around Rs150 million under duty drawback and if calculated the total amount of sales tax refund and rebate claims of the whole leather sector it will mount to over Rs600 million, Pakistan Tanners Association central chairman Sheikh Saqib Saeed Masood observed. Talking to The Nation, he said that huge amounts of working capital of the exporters are held up by the FBR in refund regimes of the Sales Tax, Special Excise Duty, Custom rebate and drawback of local taxes.  Even after necessary approvals and issuance of RPOs, a large number of refund claims are lying unpaid without any cogent reason. He said that deprived of the cash flow, the exporters were unable to sustain their export turnover and hence the decline in exports is expected, he argued.  Sh Saqib said that growth in leather exports have come to a halt and a gradual meltdown in exports have started. He urged the government to focus on consolidation and strengthening of economy and uplifting the industrial productivity in the country.  He recalled that in 2005, the FBR had declared leather, textile, surgical goods, sports goods and carpets as zero-rated sector to encourage exports and ensure relief to exporters from cumbersome refund process but the ending of zero rating has pushed them again into the refund regime.
Sheikh Saqib Saeed Masood said that Association’s member exporters feel it very hard to continue their business smoothly in the wake of a host of challenges marked by power and gas crisis, law & order concerns, rising prices of POL etc.
Non-payment of their refund claims of millions of rupees has further exacerbated their grievances to great extent. It has become well-nigh impossible for them to meet the commitment of foreign buyers’ export orders. This situation is quite alarming. It is not only detrimental to leather industry but also a colossal loss to the national kitty.
Chairman Pakistan Tanners Association appealed to the Chairman FBR to take notice of this critical situation and direct the authorities concerned to settle all the pending claims of duty drawback and sales tax of leather tanning industries expeditiously.

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