Latest news with #SalesTaxRules
Business Recorder
20-05-2025
- Business
- Business Recorder
Pakistan's textile industry deterioration: Govt has failed to address ‘fatal' anomaly in EFS
LAHORE: Pakistan's textile industry is rapidly deteriorating as, for over 10 months now, the government has failed to address the fatal anomaly in the Export Facilitation Scheme (EFS). The result is a deeply distorted tax regime that has rendered domestic manufacturing uncompetitive, gutted local supply chains, and handed Pakistan's textile value chain over to foreign suppliers. The Export Facilitation Scheme allows exporters to import raw materials and inputs at 0% sales tax but imposes 18% tax on the same inputs if they are made in Pakistan. It's an irrational, self-destructive policy that punishes domestic production and rewards imports. While the sales tax is refundable, there are high time, administrative and liquidity costs associated with refunds. Sales tax is paid when an input is procured, and the claim for refunds can only be filed once the product has been manufactured and exported — a 6 to 10 month cycle at least. Add to that administrative costs associated with filing, follow-ups, and regular harassment by the FBR. According to the data shared by All Pakistan Textile Mills Association there is a huge liquidity cost as capital becomes stuck in the sales tax regime during the 6-10 month production cycle. Once claims are filed, even though Sales Tax Rules mandate refund issuance within 72 hours, only partial refunds of 60-70% are issued once a month. The remaining amount is deferred for manual processing where there is already a backlog of over Rs 110 billion, and no progress on clearing it over the last 4-5 years. As a result, exporters have switched to imported inputs. Monthly yarn imports are over twice the historic peak (figure 1), expected to hit 300 million kg in FY25—nearly triple the 108 million kg in FY24. In total, imports of just three key raw materials— cotton, yarn, and greige fabric — are expected to be $1.5 billion higher than last year (figure 2). Meanwhile, exports are only projected to increase by $1.14 billion. More dollars are flowing out of Pakistan than coming in. The headline export figure is a facade; underneath, the industry is hollowing out. Over 800 ginning factories and 120 spinning mills have shut down, and millions of livelihoods lost. The crisis has reached the weaving sector, with looms shutting down and workers protesting on the streets. While the government chases headline numbers, it ignores that the value added in exports is increasingly foreign, and Pakistan is effectively exporting imported goods while local industry, jobs, and investment vanish. The crisis is not just limited to industry. Cotton season begins next month. Who will buy 10 million bales from farmers without a functional spinning industry? Cotton output has already fallen from 15 million bales in the mid-2010s to around 5–10 million today. While commendable steps have been taken — such as lifting the cotton seed import ban and introducing modern farming techniques under the Green Pakistan Initiative — the single biggest obstacle to cotton revival remains the current sales tax regime. Pakistani cotton is taxed at 18%, while imported cotton enjoys a sales tax-free path through EFS. Even cottonseed and cottonseed cake—basic agricultural byproducts — face an 18% sales tax, a practice unheard of globally. Given elastic demand, farmers must absorb the high tax burdens, pushing their incomes below cost of production. As the spinning sector — the primary consumer of cotton — has largely been deindustrialized by the EFS anomaly, demand for cotton has severely plummeted. With uncertain demand and no support price, there is high uncertainty regarding profitability of cotton, and farmers are shifting towards alternate, water intensive crops with severe implications for Pakistan's already scarce water resources. Destruction of the cotton sector will put millions more livelihoods at risk, especially women in cotton picking, etc. who have very few alternative sources of employment. The government has stood by — unmoved and indifferent — as the textile and cotton value chains bleed to their final demise. For nearly a year, it has failed to restore the EFS to its June 2024 form with zero-rating on local inputs. Despite repeated appeals, no action has been taken. We repeat, clearly and unequivocally: The government must immediately remove yarn and fabric from the EFS import scheme. This is the only way to halt the destruction of Pakistan's textile industry. Pakistan's export economy cannot be built on imported yarn and fabric. No country has industrialized by destroying its own supply chains, replacing them with imports. Uraan Pakistan will not happen on the grave of local industry. Copyright Business Recorder, 2025
Business Recorder
20-05-2025
- Business
- Business Recorder
Textile industry deterioration: Govt has failed to address ‘fatal' anomaly in EFS
LAHORE: Pakistan's textile industry is rapidly deteriorating as, for over 10 months now, the government has failed to address the fatal anomaly in the Export Facilitation Scheme (EFS). The result is a deeply distorted tax regime that has rendered domestic manufacturing uncompetitive, gutted local supply chains, and handed Pakistan's textile value chain over to foreign suppliers. The Export Facilitation Scheme allows exporters to import raw materials and inputs at 0% sales tax but imposes 18% tax on the same inputs if they are made in Pakistan. It's an irrational, self-destructive policy that punishes domestic production and rewards imports. While the sales tax is refundable, there are high time, administrative and liquidity costs associated with refunds. Sales tax is paid when an input is procured, and the claim for refunds can only be filed once the product has been manufactured and exported — a 6 to 10 month cycle at least. Add to that administrative costs associated with filing, follow-ups, and regular harassment by the FBR. According to the data shared by All Pakistan Textile Mills Association there is a huge liquidity cost as capital becomes stuck in the sales tax regime during the 6-10 month production cycle. Once claims are filed, even though Sales Tax Rules mandate refund issuance within 72 hours, only partial refunds of 60-70% are issued once a month. The remaining amount is deferred for manual processing where there is already a backlog of over Rs 110 billion, and no progress on clearing it over the last 4-5 years. As a result, exporters have switched to imported inputs. Monthly yarn imports are over twice the historic peak (figure 1), expected to hit 300 million kg in FY25—nearly triple the 108 million kg in FY24. In total, imports of just three key raw materials— cotton, yarn, and greige fabric — are expected to be $1.5 billion higher than last year (figure 2). Meanwhile, exports are only projected to increase by $1.14 billion. More dollars are flowing out of Pakistan than coming in. The headline export figure is a facade; underneath, the industry is hollowing out. Over 800 ginning factories and 120 spinning mills have shut down, and millions of livelihoods lost. The crisis has reached the weaving sector, with looms shutting down and workers protesting on the streets. While the government chases headline numbers, it ignores that the value added in exports is increasingly foreign, and Pakistan is effectively exporting imported goods while local industry, jobs, and investment vanish. The crisis is not just limited to industry. Cotton season begins next month. Who will buy 10 million bales from farmers without a functional spinning industry? Cotton output has already fallen from 15 million bales in the mid-2010s to around 5–10 million today. While commendable steps have been taken — such as lifting the cotton seed import ban and introducing modern farming techniques under the Green Pakistan Initiative — the single biggest obstacle to cotton revival remains the current sales tax regime. Pakistani cotton is taxed at 18%, while imported cotton enjoys a sales tax-free path through EFS. Even cottonseed and cottonseed cake—basic agricultural byproducts — face an 18% sales tax, a practice unheard of globally. Given elastic demand, farmers must absorb the high tax burdens, pushing their incomes below cost of production. As the spinning sector — the primary consumer of cotton — has largely been deindustrialized by the EFS anomaly, demand for cotton has severely plummeted. With uncertain demand and no support price, there is high uncertainty regarding profitability of cotton, and farmers are shifting towards alternate, water intensive crops with severe implications for Pakistan's already scarce water resources. Destruction of the cotton sector will put millions more livelihoods at risk, especially women in cotton picking, etc. who have very few alternative sources of employment. The government has stood by — unmoved and indifferent — as the textile and cotton value chains bleed to their final demise. For nearly a year, it has failed to restore the EFS to its June 2024 form with zero-rating on local inputs. Despite repeated appeals, no action has been taken. We repeat, clearly and unequivocally: The government must immediately remove yarn and fabric from the EFS import scheme. This is the only way to halt the destruction of Pakistan's textile industry. Pakistan's export economy cannot be built on imported yarn and fabric. No country has industrialized by destroying its own supply chains, replacing them with imports. Uraan Pakistan will not happen on the grave of local industry. Copyright Business Recorder, 2025
Business Recorder
14-05-2025
- Business
- Business Recorder
Digital invoicing systems: ‘PRAL committed to rendering costfree services to taxpayers'
LAHORE: Pakistan Revenue Automation Limited (PRAL) is committed to render cost free services to all taxpayers for digital invoicing systems and its integration with FBR. This was announced by Abid Naeem General Manager PRAL while addressing APTMA members. He said that it is mandatory for all taxpayers to install and integrate Digital Invoicing System with FBR with effect from June 01, 2025 by corporate sector and by July 01 by non-corporate members. Earlier Asad Shafi Chairman APTMA North welcomed PRAL team and appreciated them for arranging awareness session on Digital Invoicing. He said that in terms of Rule 150Q of Sales Tax Rules, 2006 all taxpayers are required to electronically integrate their hardware and software used for generation and transmission of electronic invoices through licensed integrators. Asad said that under Rule 150XF PRAL has been notified as Licensed Integrator to provide free of cost integration services to taxpayers. He added that the initiative of PRAL to conduct awareness sessions all over the country will help for education, awareness and guidance of taxpayers. Asad hoped that the training on the new system would help tremendously to guide all taxpayers well before implementation of the system. Asad Shafi hoped that such seminars will shed light on how Digital Invoicing can transfer financial operations, streamline, emphasize and foster a more transparent and efficient system. Abid Naeem GM PRAL, emphasized the critical need for businesses to embrace technological innovations. He informed that PRAL as the licensed integrators provides end-to-end free of cost assistance with structured implementation and ongoing support. He said that PRAL offers direct integration and manages compliance with regulatory requirements, helping businesses to avoid penalties. He continued that direct integration relieves businesses from technicalities and enables them to handle compliance independently. Abid said that Pakistan's financial sector is undergoing a massive digital transformation. With the Federal Board of Revenue's SRO 69(I)/2025, businesses must adapt to new e-invoicing mandates to remain compliant to improve their transparency. He said that seminar, is aimed to simplify the transition process by highlighting practical steps and addressing any concerns that the market participants may have. He added that PRAL, remains committed to providing secure, efficient, and compliant digital solutions that empower organizations of all sizes. Abid said that PRAL has always championed digital innovation in Pakistan. It is enabling businesses to seamlessly integrate e-invoicing with existing ERP systems and workflows. He added such seminars are designed to address the common challenges and misconceptions around FBR-compliant invoicing, ultimately helping participants to realize the benefits of automation, enhanced visibility, and real-time data analytics. Copyright Business Recorder, 2025
Business Recorder
03-05-2025
- Business
- Business Recorder
Corporate taxpayers, cos: FBR extends e-invoice integration deadline
ISLAMABAD: The Federal Board of Revenue (FBR) has extended the deadline by one month for all sales tax corporate taxpayers/companies and non-corporate registered persons to electronically integrate their hardware/software with customs computerized system to generate and transmit electronic invoices. The FBR Friday Issued instructions to Chief Commissioners Inland Revenue, Large Taxpayers Offices (LTOs), Medium Taxpayers Offices (MTOs), Corporate Tax Offices (CTOs) and Regional Tax Offices (RTOs) on electronic integration of taxpayers. All categories covered: FBR extends new set of rules for e-invoicing In exercise of powers conferred under Section 74 of the Sales Tax Act, 1990, the FBR has extended the date of integration with the Board's computerized system through license integrator or PRAL as required under Rule 150Q of the Sales Tax Rules, 2006 as per following: Corporate registered persons (June 1, 2025 date of integration) and non-corporate registered persons (July 1, 2025 date of integration). Earlier, the FBR had given deadline of May 1, 2025 to the corporate taxpayers and non-corporate registered persons were given deadline of June 1, 2025 for integration purposes. Copyright Business Recorder, 2025
Business Recorder
01-05-2025
- Business
- Business Recorder
Case regarding violations of Rule 150ZEO: Sealing of outlet will harm business entity and economy: ATIR bench
ISLAMABAD: A division bench of the Appellate Tribunal Inland Revenue (ATIR), Islamabad bench, in a landmark judgment, held that the sealing of retail outlet of a taxpayer will cause undue harm to both the business entity and the broader economy, undermining the objective of efficient tax collection in the context of doctrine of proportionality. In a detailed judgment, the ATIR has also discussed the discretionary authority of the court to permit an appellant to withdraw an appeal and the procedural requirements and legal framework governing the sealing of a registered person's business premises for violations of Rule 150ZEO of the Sales Tax Rules, 2006. The judgment has once again been authored by M M Akram, the senior-most judicial member of the ATIR who has earlier authored dozens of judgments on new legal issues. A Karachi-based tax consultant, Basharat Qureshi, when contacted, added that such judicial members of the ATIR selected by the FPSC through a transparent selection process, instead of lateral entry, are a blessing for the taxpayers against the high-handedness of the department and ought to be elevated to the high court to head tax benches. The facts of the case were that the Department received a complaint alleging that the taxpayer issued invoices without QR codes or non-POS invoices worth Rs10359. Based upon these allegations, the CCIR decided to take action to seal of retail outlet. The DCIR prepared a draft sealing order and forwarded the same to the Additional Commissioner and ultimately the Chief Commissioner, LTO, Islamabad, passed the impugned order. The taxpayer filed a direct appeal to ATIR. During the third hearing of appeal, the taxpayer filed an application to withdraw the appeal. The application was not entertained as important legal issues were involved. The ATIR framed two legal questions as under: Q1. Did the impugn decision dated March 07, 2025 to seal the taxpayer's business premises, without issuing a show cause notice or verifying the alleged invoices, contravenes the principle of natural justice and procedural fairness The ATIR in respect of first question held that given the procedural flaws outlined above, it is clear that the action taken by the tax authorities in sealing the business premises violated the principles of natural justice and procedural fairness. The failure to issue a show cause notice and allow the appellant an opportunity to respond constitutes a serious denial of their right to be heard. Additionally, the lack of invoice verification, the unauthorised initiation of the sealing process by an officer lacking the necessary authority, and jurisdictional errors further undermine the validity of the action. These procedural breaches, which are essential to ensuring fairness and justice, render the sealing order unlawful. Q.2 Did the Commissioner's decision to seal the taxpayer's business premises and impose a penalty appropriately reflect the principle of proportionality in relation to the alleged tax evasion? The ATIR observed that the sealing of the business constitutes a highly coercive and severe measure. Such an action may not, in every circumstance, be the most effective means of ensuring compliance with tax obligations. Therefore, it is imperative to consider whether there exist any alternate measures within the statutory framework that are less disruptive yet capable of achieving the desired compliance. In this regard, section 40B of the Sales Tax Act, 1990 provides an alternative mechanism for ensuring tax compliance. Copyright Business Recorder, 2025
