For the promotion of trade and commerce in the country, the Government of Pakistan has allocated a sum of RS. 202.828 mn for textiles industry division in one on-going and two new schemes under Public Sector Development Programme (PSDP) 2019-20. Exemption of duty on accessories and parts of textile machinery was also announced in the 2019-20 Budget.
For the financial year beginning July 1, 2019, the government has allocated Rs. 100 mn for setting up 1,000 industrial stitching units across Pakistan in two on-going schemes in PSDP-2019-20. Another sum of Rs. 2.828 mn has been earmarked for Faisalabad garments city training centre, to be set up in Faisalabad.
“Textile sector is important, and government’s policy is to support this sector with exemption of duty on various accessories and parts of textile machinery. Similarly, duty on elastomeric yarn and nonwoven fabric is to be reduced,” Minister of State for Revenue Hammad Azhar said in his Budget speech.
Under the header ‘Streamlining SRO 1125(I)/2011 Regime’, the Minister said the SRO provides for zero-rate of sales tax on inputs and products of five export-oriented sectors i.e. textile, leather, carpets, sports goods and surgical goods. The objective was to resolve delay in refund payments. However, zero-rating has created loophole and the benefit is being availed by unintended beneficiaries / non-exporters. Reduced rates for finished goods are also harming revenues. To streamline and prevent revenue leakage the Minister proposed that SRO 1125 be rescinded, thus restoring standard rate of 17 per cent.
The Minister also proposed that the rate of sales tax on local supplies of finished articles of textile and leather and finished fabric may be raised to 17 per cent. However, retailers opting for real time reporting shall be given a relaxation of rate which shall then be charged at 15 per cent.
He also proposed automation of refund of sales tax to these sectors, thus ensuring that the sales tax paid on inputs is immediately refunded. Ginned cotton which is presently exempt under SRO is proposed to be subjected to reduced rate of 10 per cent. Azhar told the Parliament that the government has been successful in securing duty-free access from China for 313 items, leading to higher volumes of exports. Knitwear exports increased 16 per cent, while readymade garments exports rose 29 per cent, he said.