Yarn traders demand removal of duties
Yarn merchants have requested Prime Minister Imran Khan to remove additional customs duty and regulatory duty on synthetic yarn and turnover tax on yarn traders in a bid to turn the textile industry competitive in international markets. Synthetic yarn is the basic raw material for the yarn industry. In a statement on Friday, Pakistan Yarn Merchants Association (PYMA) officials said that such measures would normalise trade and industrial activities and give a boost to exports.
They lamented that the industrial sector had endured a lethal dent from the Covid-19 pandemic. "Due to soaring cotton and yarn prices in local markets, the production cost of textile sector has increased significantly," said Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Vice President Hanif Lakhany. "Textile industry is the backbone of the country's economy." He recalled that the federal government had been told earlier that export volumes could only be boosted if the leadership provided relief for export-oriented industries by reducing taxes and duties, which would enable exporters to compete in world markets.
Lakhany called for withdrawing the 1.5% turnover tax imposed on yarn traders and restoring the previous tax rate of 0.1% to help the financially stressed yarn traders to get back on feet. PYMA Vice Chairman Farhan Ashrafi requested PM Khan to play an effective role in saving the textile industry and similar small and medium enterprises (SMEs) from total collapse. In addition, he called on the premier to issue immediate directives for abolishing the additional customs duty and regulatory duty on synthetic yarn, which would be in best interest of the economy and industry. Polyester yarn is currently subject to 11% customs duty, 2% additional customs duty and 2.5% regulatory duty in addition to the anti-dumping duty, which ranges from 3-11%.
"Keeping this in view, the government should create conducive environment for traders by reducing duties and taxes in order to enhance industrial activities and create employment opportunities," he said. Topline Securities analyst Saad Ziker said that yarn merchants had been making these demands for the past few months. "The government eliminated 5% regulatory duty on the import of raw material in December 2020 to make things better for exporters," he said. To resolve the issue of high cotton prices in the local market, the government was already making efforts to produce 10.6 million bales of cotton, he said.
However, the overall consumption requirement of cotton in Pakistan stood at over 15 million bales, he highlighted. According to him, the possibility of reducing turnover tax to 0.1% is quite low because the government collects 1% turnover tax from those exportoriented companies that send 80% of their produce abroad.