Exporters demand abolition of new tax regime

KARACHI: While rejecting the federal budget 2024-25, almost all the key chambers and trade associations have asked the government to abolish the Final Tax Regime (FTR) and other anti-exports taxation measures.

They believe that these measures will have disastrous consequences, leading to a decline in precious foreign exchange earnings and adversely affecting revenue generation for the national exchequer and urban employment for millions of people.

Addressing a press conference at the PHMA House on Tuesday, which was virtually attended by representatives of various associations from other stations across the country, Chief Coordinator and Spokesman of All Exports Associations of Pakistan (AEAP) Muhammad Jawed Bilwani warned the government to observe a black day and suspend exports for one day if the issue isn’t resolved immediately.

“The next option is to close the factories,” he warned.

Exporters from all over Pakistan have unanimously rejected the proposed imposition of a Normal Tax Regime (NTR) and abolishing the FTR regime for exporters, terming it “counterproductive.”

This would create unnecessary hassle with the uncalled-for involvement of FBR officials and may open the gates of corruption. Other association representatives were also online from the upcountry during the press briefing.

Presently, the 1 per cent tax deduction under FTR is at source deducted electronically upon receipt of export proceeds, irrespective of profit or loss, without human intervention in a transparent manner.

The finance minister, the FBR chairman and the commerce minister have yet to consult the textile export associations for the federal budget proposals FY25.

Various chambers of commerce and industry representatives also lamented that the removal of zero-rating on local supplies to registered exporters will compel them to claim sales tax refunds from FBR, a lengthy process contrary to the spirit of EFS.
Tax on healthcare devices

In Islamabad, the Healthcare Devices Association of Pakistan (HDAP) has expressed concern on behalf of patients, healthcare providers and stakeholders over the government’s decision to impose sales tax on healthcare devices.

It said that the imposition of 25 to 30 per cent sales tax on essential healthcare products such as cardiac equipment, dialysis machinery and diagnostic kits, alongside the removal of tax exemptions for charitable hospitals (GST exemptions from the Sixth Schedule), threatens to increase healthcare costs massively.

However, an official of the Drug Regulatory Authority of Pakistan (Drap) said the exemption of tax should be only for genuine charitable and welfare hospitals and a clear policy should be made by the government to identify them.

“The imposition of this hefty sales tax on essential healthcare products is a devastating blow to our healthcare system. It threatens to make vital medical treatments unaffordable for millions of people of the country, particularly those from the low-income group,” HDAP chairman Masood Ahmed told Dawn on Tuesday.

 

 ISLAMABAD: The commerce ministry has formed a special committee to assess proposals from exp­o­rters amidst opposition parties’ rejection of the government’s proposed tax measures.

Ahead of the passage of the Finance Bill 2024 in the parliament, Commerce Minister Jam Kamal Khan held a meeting on Monday to address concerns raised by the All Export Assoc­iation of Pakistan. The National Assembly will likely approve the finance bill in the next few days.

The committee will present its recommendations to the finance minister. However, it is unclear if these recommendations will be submitted prior to or following the approval of the Finance Bill 2024.

An official announcement of the commerce ministry said the meeting was convened on Prime Minister Shehbaz Sharif’s directions to address concerns about the federal budget among exporters and other business communities.

In the budget 2024-25, the government has changed the tax regime for exporters from 1pc Final Tax Regime (FTR) to staggering Minimum Tax Regime (MTR). In addition to 1pc income tax, exporters also pay 0.25pc Export Development Fund and this cost increase cannot be transferred to foreign buyers.

Pakistan Textile Exporters Association Patron-in-Chief Khurram Mukhtar said that with such moves, the government has defeated its own principle of export-led growth by exponentially increasing the cost for the export sector.

He pointed out that the highest growth-oriented textile industry is facing an acute shortage of finances as a significant portion of exporters’ working capital, approx. Rs700 billion, is stuck in the refund regime, resulting in the burden of paying 24pc interest on outstanding refunds.