Karachi: KARACHI CHAMBER OF COMMERCE and INDUSTRY (KCCI), President, Mian Abrar Ahmad has demanded to defer the implementation of SRO.1012 dated 04.11.2011 with immediate effect until necessary consultations are held with all stakeholders including the Chambers of Commerce and Trade Bodies before any changes are made in the “Zero rated Sales Tax” regime. In his letter to Chairman FBR, President KCCI has demanded immediate appointment for a detailed discussion with representatives of the KCCI along with other major stakeholders.
He was of the view that the framework and procedures provided in the SRO.283 for “Zero rated Sales Tax” regime for five export sectors has so far worked smoothly for both the trade and industry by ensuring a level playing field.
Therefore the rate of Sales Tax for both Industrial and Commercial importers be maintained at “Zero” to avoid distortions in tax policy, prevent misuse of the zero rated facility and eliminate the scope of corruption which is an integral part of “Refund” process.
Mian Abrar Ahmad informed that delegations of Pakistan Chemicals and Dyes Merchants Association and Pakistan Yarn Merchants Association led by their Chairmen visited KCCI and requested to immediately raise the issue with concerned authority while demanding to suspend SRO-1012 and reinstate SRO 283.
Besides a large number of representations from KCCI members belonging to trade and industry as well as affiliated trade bodies, expressing serious grievances over the drastic changes unilaterally made in “Zero rated Sales Tax regime for 5 export sectors” under the SRO No.1012 dated 04.11.2011 which cancels and supersedes the SRO No.283 (I) 2011 dated. 01.04.2011.
President KCCI articulated that the assessing officers of the relevant Collectorate are misinterpreting the conditions of the SRO 1012 and charging the value addition on Sales Tax as well as the Withholding Income Tax at normal applicable rates (3% to 5%) on commercial imports of notified items.
In some cases, the total incidence of Taxes charged by the Customs has been 13% to 14% on the consignments cleared on or after November 4, 2011. Ironically, the new rules introduced in SRO 1012 provide for commercial importers to claim refund for the 5% Sales tax by issuing “zero rated” invoices to the registered industrial buyer, whereas the very idea of “Zero Rated Sales Tax” was evolved and implemented to eliminate the “Refunds” which had been a major source of corruption and resulted in heavy losses to the exchequer. The modified scheme will once again open the floodgates of corruption that is always an integral part of “REFUND” procedures.
President KCCI voiced that apparently the true spirit of Zero rated tax regime has been undermined by eliminating the entire segments of “commercial importers, traders and wholesalers” from the scope of this scheme. These important segments are a vital link in the supply chain of raw materials and intermediates mainly catering to small and medium sized industries and exporters.
The sector is not just a source of indirect finance to the SMEs but also generate employment opportunities. Such measures may lead to closure of well-established markets in major cities of Pakistan dealing in chemicals, yarns and fibers, processing aids and accessories used in all major export oriented industries.
Under the amended conditions it would be impossible for the commercial importers and wholesalers to survive and compete with the imports by those registered as industry whether or not they have a physical presence or actually conduct any exports.
Mian Abrar stated that such drastic measures without consultation with relevant representatives of trade and industry are not only surprising but also raises questions about the sincerity of concerned authorities in providing a fair and equitable environment for investment in various sectors of economy which have the potential and will to generate substantial revenue for the exchequer.
For more information, contact:
M. Shafiq Baig
Public Relations Officer
Karachi Chamber of Commerce and Industry (KCCI)
Tel: +9221 9921 8001 -09
Fax: +9221 9921 8010
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