Five key export-oriented sectors in Pakistan—value-added textiles, sports goods, surgical instruments, leather, and carpet—recently joined hands to hold a protest demonstration in Karachi against the proposed withdrawal of the ‘zero-rating facility’, i.e., ‘no tax no refund’ benefit, and warned the government of ‘no exports days’ if that is not restored. The latest budget proposed discontinuation of this facility. The five sectors drive 70 per cent of the country’s exports revenue. Representatives of all key industry associations said the withdrawal would result in the closure of industries and severe unemployment, according to Pakistani media reports. Governments earlier had imposed 1-2 per cent sales tax on five zero-rated export sectors, but the present government imposed 17 per cent sales tax on them. This would destroy the entire value-added exports, industrial chain and allied industries, they said. The exporters said imposition of 17 per cent sales tax would compel foreign buyers to shift to other regional countries competing with Pakistan. Industrialists said refunds worth Rs 200 billion related to sales tax, customs rebate, withholding tax, drawback on local taxes and levies and duty drawback of taxes are already stuck with the government. They said the ministry of finance and the Federal Board of Revenue plan to collect interest-free money in the form of sales tax to meet tax revenue targets by putting exports at stake. The industrialists said collection of sales tax and then refund is a futile exercise, which creates hassles and also opens avenues for corruption.
