Despite several requests from Ministry of Textiles to Federal Board of Revenue, the value-added textile sector is still facing serious financial crisis, as more than Rs.200 billion of value-added textile chain has been stuck up with the government.
According to officials, millions of rupees refunds of Sales Tax and Customs rebates payable to the exporters have been held up despite government assurances that all refunds of the exporters would be cleared by September 2014.
The textile industry representatives have been pleading to the government to issue instructions to FBR for speedily releasing cheques against all the pending Sales Tax refunds and Customs rebate claims. They have been suggesting the government to apply no payment no refund, policy, for value-added textile sector because collection of 2 per cent Sales Tax and then refunding was not only an exercise in futility but involved a large number of FBR personnel and precious time of FBR.
According to textile representatives, Federal Board of Revenue (FBR) still withheld more than Rs 13 billion under Drawback on Local Taxes and Levies (DLTL) claims and about Rs 17 billion sales tax under refund claims, causing immense problems to cash-starved industry. They claim that delay in payments is one of the major reasons Pakistan has failed to improve its textile exports despite getting Generalised System of Preferences plus status from European Union. FBR says it is working to clear up outstanding claims. According to FBR officials, RPOs worth 8 billion have already been issued for the period July, August and September. Claims worth 14 billion are classified as deferred payments on account of some deficiencies, whereas claims worth 8.2 billion have been freshly filed. Further, they state that from July 2014 to January 2015, 14 billion refund claims of the textile sector have already been paid against Rs. 8 billion in corresponding period of last year. The officials claim that all the deferred claims would be disposed off before 28th Feb, 2015. The February has started but viewing the speed of work, experts believe FBR need to expedite the process, otherwise the textile sector would continue to suffer.