Karachi Chamber Of Commerce & Industry (KCCI) has demanded deference of implementation of SRO1012 dated 4th November 2011 with immediate effect. The proposed postponement is until necessary consultations are held with all stakeholders including chambers of commerce and trade Bodies before any changes are made in “Zero rated Sales Tax” regime. In his letter to Chairman FBR Mian Abrar Ahmad President KCCI, has demanded immediate appointment for a detailed discussion with representatives of KCCI along with other major stakeholders. He was of the view that framework and procedures provided in 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 rate of Sales Tax for both Industrial and Commercial importers should be maintained at “Zero” to avoid distortions in tax policy. The action would also prevent misuse of 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 suspension of SRO 1012 and asked to reinstate SRO 283. A large number of representations from KCCI members belonging to trade and industry as well as affiliated trade bodies, expressing serious grievances over drastic changes unilaterally made in “Zero rated Sales Tax regime for 5 export sectors” under SRO No1012 dated 4th November 2011. This cancels and supersedes SRO No.283 (I) 2011 dated 1st April 2011.
President KCCI articulated that assessing officers of relevant collectorates are misinterpreting conditions of SRO 1012 and charging value addition on sales tax as well as withholding income tax at normal applicable rates (3 per cent to 5 per cent) on commercial imports of notified items. In some cases, total incidence of taxes charged by customs has been 13 per cent to 14 per cent on consignments cleared on or after 4th November 2011. Ironically, new rules introduced in SRO 1012 provide for commercial importers to claim refund for 5 per cent sales tax by issuing “zero rated” invoices to registered industrial buyer. Whereas, the very idea of “Zero Rated Sales Tax” was evolved and implemented to eliminate “Refunds”; this has been a major source of corruption and has resulted in heavy losses to the exchequer as well. Modified scheme will once again open floodgates of corruption that is always an integral part of “Refund” procedures.
President KCCI voiced that apparently true spirit of zero rated tax regime has been undermined by eliminating entire segments of “commercial importers, traders and wholesalers” from the scope of this scheme. These important segments are a vital link in 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 SMEs, but it also generates 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 amended conditions it would be impossible for commercial importers and wholesalers to survive and compete with imports by those registered as industry whether or not they have a physical presence or actually conduct any exports.
Mian Abrar stated such drastic measures without consultation with relevant representatives of trade and industry are not only surprising but also raise questions about sincerity of concerned authorities in providing a fair and equitable environment for investment in various sectors of economy which have potential and will to generate substantial revenue for exchequer.
