All Pakistan Textile Mills Association (APTMA) announced that after a decade, the textile sector of Pakistan saw a historic growth of $3 billion but decried that 17% of sales tax on the machinery will shake investors’ confidence.
The government has increased General Sales Tax (GST) on textile machinery from 10% to 17% along with other increments on raw materials.
The association emphasized that the government has to withdraw its decision to keep the ginning factories and oil mills running.
The textile sector plays a vital role in the economy of Pakistan as it has the largest role in the nation’s exports.
If Pakistan’s exports reach around $24 billion in the near future, around half of the share would be of the textile industry.
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To reduce the production cost, Pakistan has the potential to invest $3 billion in the textile sector to modernize it.
Talking to News360, APTMA Executive Director (ED) Shahid Sattar said that Pakistan is going to make a historic investment in the textile sector after 3 decades in an attempt to evolve it on modern lines.
He added that with this investment, the textile industry would be able to adopt latest technology and modify the process.
Challenges for the new textile sector
Answering a question, APTMA ED said problems have arisen after the government has increased sales tax on textile machinery from 10% to 17% in the federal budget.
Further, he added that Pakistan has already launched some projects worth $2.5 billion recently. Therefore, the government should restrain from hiking tax till the production starts.
Possibility of sales tax refund
Shahid said that by increasing the sales tax on plants and machinery, investors would be stuck in cash flow and tax refunds for investments.
The FBR will have a deposit of around Rs 50 billion and once the factory starts production, the sales tax will be refunded in many years.
Demands of All Pakistan Textile Mills Association
Unfurling the demands, Shahid said with the hike in sales tax on raw materials would add woes as most of it imported due to insufficient local production.
He requested that sales tax on cotton should be maintained at 10% to promote textile exports and no extra charges should be imposed on plant machinery.
The official mentioned that the new budget should facilitate businesses to create employment opportunities and to earn heavy foreign exchange by increasing exports.