GST imposition will cripple leather industry

LAHORE: Various leather industry associations presented a united front in opposition to the imposition of reformed General Sales Tax (GST), which they claim may very well push the export-oriented sector to the brink of closure.
At a press conference, jointly chaired by LCCI President Shahzad Ali Malik, Chairman Pakistan Tanners’ Association Khurshid Alam, Pakistan Leather Garments Manufacturers and Exporters Association (PLGMEA) Vice Chairman Mudassar Masood Ch., Pakistan Footwear Manufacturers Association Chairman Farrukh Saleem and Representative of Pakistan Gloves Manufacturers & Exporters Association Shahid Latif, participants were critical of the government’s continuous ignorance on the reservations of exporters regarding the imposition of the reformed GST.
The LCCI Senior Vice President Sheikh Mohammad Arshad, who also belongs to the leather sector, criticised policy-makers for not taking the stake-holders into confidence on decision of reformed GST.
The Pakistan Tanners’ Association Chairman Khurshid Alam claimed that corrupt individuals were firmly embedded in the decision-making process of the government.
He maintained that this disreputable group was responsible for the government’s ignorance of the reservations held by the exporter community and protests by leading political parties against imposition of reformed GST.
The Pakistan Tanners Association Chairman said that Rs 12 billion of the leather sector would get stuck up in tax refund system annually after imposition of reformed GST.
He added that the government was also holding up hefty amounts of exporters’ under the export rebate which currently stands at around one percent.
It seems impossible in the present state of functioning that FBR could smoothly release 15 percent of GST refunds. To meet this shortfall in working capital, exporter/entrepreneur would resort to the bank for financing its export for which mark-up rate itself is on a parallel rise. Thus the industry would ultimately collapse.
Government should wisely consider the implication of reformed GST instead of blindly following the IMF agenda, he added.
Highlighting major issues of the leather industry, Khurshid said that smuggling and export of live animals was creating scarcity of hides and skins for leather along with a shortage of milk and meat for the common man.
He further apprised that government has already been approached on several occasions to take note of malpractice of under-invoicing. Vice Chairman PLGMEA Mudassar Masood stated that leather and leather products have an export of 95 percent and the government has failed to recognise the importance of 2nd largest exporting industry of Pakistan.
Gas load-shedding and shortage of raw materials have hampered the continuous industry processes and directly threatening the competitiveness of leather sector.
Pakistan Footwear Manufacturer Association Chairman Farrukh Saleem, while agitating against imposition of RGST, said that Rs 420 million of leather exporters is held up on account of deferred claims of sales tax and government departments are not paying any attention to resolve these cases. Revoking the zero-rate status from leather industry would create an acute shortage of working capital and would hence reduce size of the sector, while exports might dwindle by 30 percent.
Supporting the arguments, Representative of Pakistan Gloves Manufacturers & Exporters Association Shahid Latif termed the imposition of reformed GST as a hasty decision.
He stressed on the need to completely revamp the FBR and the tax machinery if the government was serious at gaining fruit out of the reformed GST imposition.
He said that the government and IMF should first bring reforms for FBR while focusing on the real essence to bring ease and comfort for the tax payers’ community.
Lahore Chamber of Commerce & Industry President Shahzad Ali Malik advised the government to focus on strengthening its export base rather than look at IMF.
He said that industrialist had never backed out in the hour of need and recalled the notable contribution by leading exporters and industrialists for earthquake and flood victims.
He asked the government to extend trust on exporters and industrialists as they possess the potential to give a much needed boom to the economy. He told that LCCI is ready to extend its support to five exporting sectors for establishing a joint forum to plead its case against imposition of reformef GST and discontinuation of zero-rating of sales tax.