Pakistan announces reduction of sales tax rates for textile and leather products

by:JIYALI     2021-08-08
The Federal Revenue Commission of Pakistan announced on Friday that the country’s domestic leather and textile product sales tax rate will be reduced to 5%. This adjustment can be traced back to June 13, 2013. Related to this, the committee also announced two other notices.   Earlier, in the 2013-14 budget, leather and textile-related products were included in Annex 3 of the Sales Tax Act 1990, so a 17% retail tax was levied. Now this tax rate levied on retail prices has been reduced to 5%. The notice also mentioned that the sales tax rate of leather and textile intermediate products or raw material products outside of Pakistan's five free zones (a gathering point for export enterprises) has increased from 5% to 17%. There is news that: fbr believes that tax cuts are only applicable to export companies, so if these products are sold outside of the five major free zones, the tax should be levied according to normal standards.   It is understood that Pakistan's leather exports in the first three quarters of the 2012-2013 fiscal year (July 2012-March 2013) reached US$417 million, an increase of 2.22% from the US$408 million in the first three quarters of the 2011-2012 fiscal year. Among them, leather apparel exports increased 8.51% from 263 million US dollars to 285 million US dollars; leather glove exports fell 7.18% from 132 million US dollars to 123 million US dollars; other leather product exports fell 30.35% from 12.604 million US dollars to 8.779 million US dollars. In March 2013, Pakistan's leather exports reached 48.77 million U.S. dollars, an increase of 45% from the 33.713 million U.S. dollars in March 2012. Pakistan’s textile industry is the country’s largest industry, accounting for 46% of the manufacturing industry. Employees in the manufacturing industry account for 40% of the total employment rate and 30% of the entire employment rate, contributing 8.5% to the GDP. . At the same time, Pakistan is also the world's fourth largest cotton-producing country. Its spinning capacity accounts for 5% of the world's total capacity, making it the third largest textile industrial country in Asia. Pakistan has 8.8 million spun yarns, and its cotton spinning industry has 458 departments, including 50 blended textiles and 408 pure textiles.   The textile industry also plays a pivotal role in foreign trade, with exports accounting for about 60% of total exports. Its cotton, semi-finished textile yarns and cotton fabrics occupy a certain share in the world's textile trade. At present, the United States imposes a 23% tariff on Pakistani textile exports, but Pakistan’s annual textile exports to the United States amount to US$3 billion, mainly knitted sweaters, bed sheets, gloves and towels. The textile industry in FY13 was quite good because of stable cotton prices and strong demand for yarns and grey fabrics in China, which increased the profits of the textile industry.   In the 2013 fiscal year, Pakistan exported 13 billion US dollars of textiles, a year-on-year increase of 5.9% in rupees, and a year-on-year increase of 14.7% in US dollars. The country’s export growth is largely attributed to China, which encourages textiles to import more yarns and grey cloths. As a result of the above factors, the profitability of the textile sample company increased fourfold to 22.8 billion rupees, compared to 4.4 billion rupees the previous year.  According to the notice, the same sales tax rate has been applied to commercial importers and manufacturers in the import stage. Commercial importers and manufacturers are uniformly levied a 5% sales tax rate during the import process. Similarly, the notice applies to products other than serial numbers 22 and 36 in Annex 3 of the Sales Tax Act 1990 on retail textile products and any other products. Another issued notice is to delete the serial numbers 22 and 36 and other related clauses in Annex 3 of the tax law bill.
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