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Delayed refunds hit textile units in Pakistan

More than a hundred textile mills in Pakistan may close if they do not get sales tax refunds. These mills are facing liquidity issues and a high cost of doing business. The industry has been compelled to borrow from banks. The view is that timely refunds payment will help in increasing the country’s exports by $4 to $5 billion.

A working capital blockage creates difficulties for exporters to complete orders on time. If the government is unable to immediately settle the amount, the industry wants bonds to be released against refunds. An alternative is to bring the export sector back in the zero-rate sales tax regime to minimise the refunds pendency.

Under law refunds have to be released within 45 days, but there have been complaints of delayed refunds for the last one year. In many cases, refund processing orders, which were to be honored in a certain time, were issued but cheques were not issued for six months. Some of the refunds were deferred in cases where invoices were issued by persons, who later became defaulters. The industry requests refunds of genuine taxpayers to be cleared forthwith. It says it is already facing a shortage of power and higher utility rates.

 
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