The Pakistan textile industry has been facing trouble due to delays in sales tax refunds, customs rebate and drawback on local taxes and levies. The value-added garment sector wants zero-rating status to be granted to five export-oriented sectors to boost the country’s exports. The industry says the zero rating No Payment No Refund system for exports should be implemented forthwith since collecting sales tax and then refunding is not only an exercise in futility but is time consuming and also burdens foreign exchange earning exporters with unnecessary hurdles.

Pakistan’s exports have declined 12.92 per cent in the first nine months of the current fiscal year. Apparently only a few payments below Rs 5 million against those refund payment orders issued till August, 2015 have been paid to businessmen. For exporters with claims of over Rs 5 million, initially they had been promised payments in the form of bonds and later payments in cheque but no payments have been made to them as yet.

A significant number of textile mills in key manufacturing hubs of Pakistan like Lahore, Faisalabad, Multan and Karachi are closing down because they are unable to compete with low cost rivals like Bangladesh and Vietnam.