Exemption from 5 percent GST: FBR rejects demand of unregistered power looms

National Assembly Standing Committee on Textile Industry on Monday demanded of the Federal Board of Revenue (FBR) to exempt the un-registered power looms, sizing, hosiery and towel sectors from 5 percent General Sales Tax (GST). However, Federal Board of Revenue representative present in the meeting declined to accept the demand of seeking exemption from 5 percent GST to unregistered power looms, sizing, hosiery and towel sectors.

The Chairman of the Committee Haji Muhammad Akram Ansari, an MNA observed during the meeting held here that unregistered power looms, sizing, hosiery and towel sectors are already paying GST on their purchases, utility bills such as power, gas and other input used. They are not allowed refund of such GST payments made on different stages, as they are considered as unregistered because their annual turnover is below Rs 5 million.
 

The FBR representative, who had been invited to resolve the issue of imposition of GST on unregistered power looms, sizing, hosiery and towel sectors, informed the committee that imposition of tax is step towards documentation of the undocumented sectors. Any exemption to unregistered portion of textile sector would be discrimination against those who have registered themselves and meeting all legal and tax formalities. The representative also requested the standing committee that committee should give its recommendations keeping in view the other unregistered sector of economy.

 Ijaz Khokhar, the representative from textile sector, informed the committee that the government had introduced GST Zero Rating regime for the textile value chain on it''s local sales by reducing the statutory rate of 16 percent to just 5 percent in it''s inputs, intermediaries and final products of five export-oriented sectors like textile, leather, sports goods, surgical instruments and carpets at import and local supplies, subject to the certain restrictions.

The SRO 1125 (i) 2012 issued on December 31, 2011 required registered manufacturers, who process goods owned by unregistered persons to charge and collect sales tax at 5 percent on processing charges received by them, in respect of goods owned by unregistered persons, however, no such charges were to be recovered from registered persons. The sizing, weaving and wrapping industry including power looms, were also required to charge sales tax at 5 percent on amount of service charges charged in lieu of services of wrapping, weaving, rendered to their registered clients.