Islamabad, Dec 12: Atif Ikram, president of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), has called on the federal government to restore the Export Finance Scheme (EFS) to its pre-Finance Act 2024 state as soon as possible.
He said that the textile industry and associated sectors had suffered as a result of the Act’s changes, which eliminated sales tax exemptions and zero-rating on domestic materials used in export manufacture. Ikram voiced serious worries about the industry’s large losses and the widespread shutdown of spinning facilities.
He pointed out that the national exchequer has suffered significant losses as a result of the abuse of EFS, which has also hurt local producers’ ability to compete by rerouting imported cotton and blended yarns that are free from sales tax and tariffs into the domestic market.
He said, “Our appeals have remained unaddressed,” emphasizing the grave ramifications of doing nothing. “With more than 40 spinning mills already forced to close and another 60 on the verge of doing so, the domestic industry is on the verge of collapsing.” He cautioned that upstream industries like weaving and processing could be completely destroyed by the knock-on effects.
The president of the FPCCI stressed that the removal of zero-rating for domestic materials used in export production was meant to increase income but has instead had the opposite effect.
As a result, commercial activity has decreased, which has further reduced the government’s revenue base. He advocated for a prudent and well-rounded approach to policymaking that safeguards the national exchequer as well as the sector.
Important Concerns Voiced by FPCCI:
Abuse of Imports Without Duty: Due to unfair competition for local manufacturers, a sizable amount of duty-free imported yarn under EFS is marketed domestically.
Employment Impact: Thousands of textile workers have been displaced by spinning mill closures, which has increased unemployment.
Obstacles for Homegrown Manufacturers: An 18% sales tax on inputs is required of local producers and is only refunded after extended delays. This hinders manufacturing and causes financial problems.
Absence of Oversight: The current system has insufficient safeguards against dishonest behavior, which leads to revenue losses and market distortion. “Pakistan’s textile industry used to occupy a special place in the world, competing with big exporters like China and India,” Ikram stated. However, it is regrettable that poorly thought out policies are currently undermining these assets.
Suggestions
Enhanced Oversight: A thorough reassessment of every EFS beneficiary to guarantee openness and compliance.
Penalties for Misuse: Strict measures against individuals who commit fraud or abuse the plan.
Support for Domestic Industry: Zero-rating and tax benefits for domestic suppliers employed in export manufacturing should be reinstated immediately. Ikram urged the administration to act swiftly and decisively in his closing remarks.
