Pakistan imposes general sales tax on textiles

PAKISTAN: General sales tax imposed on textile products

By Ahmed Abdullah | 18 March 2011

The tax is seen as a threat by Pakistan's textile industry

Authorities in Pakistan this week imposed a general sales tax (GST) and raised special excise duty (SED) on textiles, leather and carpets goods - arousing strong opposition from the country's textile industry.

According to the Federal Board of Revenue (FBR), domestic sales of these sectors will now be liable to GST at the standard rate of 17%, with SED charged at 2.5% for the remaining period of the current fiscal year, up from 1% previously.

Before, textile, leather, and carpet goods were exempt from the GST on local as well as export sales, since over 80% of their products were meant for export.

The textile sector on Wednesday rejected the imposition of the GTS and increase in SED and called on the government to immediately withdraw the taxes.

Zubair Motiwala, president of the Council of All Pakistan Textiles Associations (CAPTA) expressed surprise at the new levy and said the textile sector is facing hardship and is unable to pay the taxes due to high cotton and yarn prices, frequent gas and electricity cuts, and liquidity problems.

Ijaz Kokar, chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), told just-style that the textile industry is already facing problems due to a shortage of power, non-availability of raw materials and the high cost of doing business.

He claimed the new taxes would push the textile industry to the verge of closure.

Sectors: Fibres & fabrics, Finance, Manufacturing