The government has recognized the challenges faced by the textile industry and has taken proactive steps to address them, including a commitment to disburse deferred sales tax refunds within a week.
This announcement came after a meeting between Federal Minister of State for Finance, Revenue, and Energy, Ali Pervaiz Malik, and Khurram Mukhtar, Patron of the Pakistan Textile Exporters Association (PTEA).
Khurram Mukhtar emphasized the government's commitment to resolving critical issues impacting the textile sector, such as the rising production costs due to increased energy tariffs and the delays in refund disbursements that have created severe liquidity challenges. He stressed the urgent need for comprehensive reforms to address these pressing concerns, including the prompt release of pending refunds, rationalization of energy tariffs, improved access to capital, reduction in interest rates, and the swift reinstatement of the Export Facilitation Scheme (EFS).
Mukhtar highlighted the significant financial strain on exporters caused by pending refunds related to deferred sales tax, duty drawbacks, DLTL (drawback of local taxes and levies), TUF (technology upgradation fund), markup subsidies, and income tax. He urged the government to ensure that refunds are processed within the agreed 72-hour timeframe to alleviate the financial burden on exporters and enhance liquidity within the sector. He also called for the elimination of cross-subsidies imposed on industrial tariffs, particularly the subsidy provided to the fertilizer sector, which is currently being funded by the export sector.
Mukhtar further stressed the importance of aligning energy tariffs with the export strategy to maintain Pakistan’s global competitiveness. He advocated for an immediate reduction in interest rates to 14%, arguing that the current rates are detrimental to creating a healthy business environment. Additionally, he emphasized the importance of continuing the Export Facilitation Scheme to fully document the value chain and support export manufacturing. He pointed out inconsistencies in the taxation system, noting that exporters are now subject to a 2% advance tax, while domestic businesses in the same sector pay only 1.25%. He called for an end to this discriminatory practice and recommended suspending the 0.25% Export Development Surcharge (EDS) until the funds already collected are utilized for export development.
He also criticized the Sindh government for imposing a 1.8% tax on imports under the EFS, which are intended for re-export after value addition, arguing that such imports should be exempt from all taxes, duties, and levies. Additionally, he urged the Punjab government to abolish the 0.20% stamp duty on export-related bills of exchange, a practice not followed by any other province. Mukhtar concluded by stating that the Prime Minister had directed all relevant ministries to implement necessary reforms, which are expected to bring significant improvements to the country’s business environment in the coming months.
The textile sector's revival, along with the growth in textile machinery production, highlights the positive trajectory of the industry. Despite challenges like rising raw material costs, continued demand for textiles and government initiatives like TUFS are promising for the future of the textile machinery segment and the overall textile manufacturing industry in the country.
During this period, the textile machinery industry has focused on integrating automation, digitalization, and sustainable practices to enhance productivity, quality, and environmental impact. These advancements have revolutionized the textile manufacturing process, making it more efficient, flexible, and eco-friendly.
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