All Pakistan Textile Mills Association (APTMA) in its letter to Razzak Dawood, Adviser to Prime Minister on Commerce, Textile, Industry & Production and Investment has sought his intervention for elimination of the new change in tax refund mechanism as consumption based refund policy is detrimental for the industry.
As per APTMA, the system cannot be accepted as it will erase the liquidity of around Rs 300 billion as it will remain stuck with the government all the time. If the new system is allowed to continue, it will destroy the industry due to the non-availability of the liquidity. The refund system has been moved to a consumption based refund policy rather than an input based monthly sales tax return on input based system. The policy will permanently transfer approximately 5-6 month value of input on materials from industry to the coffers of FBR. And the total value of sales tax collection is estimated to be Rs 600 billion annually, this means Rs 250 billion.
In addition, the fastest system is currently processing only 42 per cent of the claims made, the rest being referred to the old star system of verification. This will further delay refunds of over Rs 50 billion taking the total transfer from industry to FBR to Rs 300 billion.
The letter also suggests that a very simple way to verify claims is to request FBR to provide the sales tax collected for the first three months and the refunds made pertaining to this period only. This is necessary to include the refunds made for early periods and the irony is that the bulk of those were also made the bonds which were worthless and which position we understand FBR is correcting.