APTMA Proposal in Response to Budget Proposal 2019

Lahore (28th June, 2019): The All Pakistan Textile Mills Association (APTMA) has released their proposal in response to the government’s proposed budget for fiscal year 2019-2020. 

According to Baaghi TV’s sources, APTMA have released their proposal with respect to sales tax and income tax respectively. APTMA has demanded that the standard sales tax be reduced to 7.5% keeping in mind the local sales for five export sectors.

They have further proposed that since ‘zero-rating’ has been allowed for utilities through Sales Tax General Orders (STGO), either the previous should be allowed to continue or the standard rate should also be reduced to to 7.5%. They have alternatively proposed that a replacement SRO be put in effect for the purposes of ENERGY, as already agreed with APTMA.

Moreover, APTMA has proposed that sales tax on ginned cotton and polyester staple fiber should also be reduced to 5%. They have argued that such sales tax could negatively impact the agricultural sector of Pakistan since more cotton would be imported through Duty and Tax Remission Scheme (DTRE) and it would consequently place Pakistan at a disadvantage given the economic situation of the state.

According to Baaghi TV’s sources, APTMA has argued that differential on sales tax on Polyester chain will result in man-made fibers (MMF) being relegated which would place Pakistan at a further disadvantage. They have therefore, proposed to “disallow input tax credit attributable to supplies” on a pro-rata basis. APTMA has argued that since there are various Laws under which responsibility of NIC validity falls upon the seller, not only will it force the seller into criminal liability but will also financially damage them. Thus, the condition for CNIC to be withdrawn, should be revoked as there is no system to verify the authenticity of the CNIC of every seller.

In connection to Income tax, APTMA has provided the following argument that since the textile industry is already “incurring loses” for the past few years, it is imperative for the government to reduce minimum tax rate for the five exports sectors. They believe that it will  “hasten the demise of Textile Mills” that are already on the “verge of closure” due to margins being extremely thin even in “the best case scenario”.

APTMA has further argued that the threshold which has been fixed at Rs. 10,000/- since 2004 should be revised to Rs. 25,000/- so as to make the law reasonable and practical. Also, the threshold of Rs. 15,000/- [since 2008] should simultaneously be amended to Rs. 25,000/- so as to make the law flexible and practical.

Baaghi TV’s sources have further confirmed that APTMA has negotiated through its proposal that the minimum salary which is Rs. 17,500/- will also lead to an anomalous situation. Therefore, the adjustment of minimum tax towards normal tax is an unjust provision so, even if it has been kept unchanged, should be removed.

Furthermore, tax credit for the tax year 2019 is being reduced from 10% to 5% of the purchase value of machinery, should be continued.

They have continued to discuss that although the tax credit of 10% on new investment as well as the Balancing, Modernizing and Replacement (BMR) be continued, the “disallowence be removed”. Moreover, since the Textile industry has not been able to undertake any BMR for the last few years, the government should consider the APTMA proposal as Pakistan’s Textile industry needs to remain in competition with the international market place.

Stay tuned to Baaghi TV for more updates.