FBR urged to withdraw amendment in SRO 1125(I)/2011

The Lahore Chamber of Commerce & Industry Wednesday urged the Federal Board of Revenue (FBR) to withdraw amendment in SRO 1125(I)/2011 dated 31.11.2011 through SRO 491(I)/2016 dated 30.06.2016, under which input tax credit or refund of packing material of all sorts has been disallowed.

In a statement issued here, the LCCI President Sheikh Muhammad Arshad, Senior Vice President Almas Hyder and Vice President Nasir Saeed said that this will have far reaching consequences for the nascent packaging industry established in the country.

The LCCI office-bearers said that most of the said packaging industries are supplying packing material to the exporters and are duly registered for sales tax. They said that the denial of input tax/refund to exporters will encourage them to make purchases from un-registered persons so that only 1% tax is required to be withheld, instead of making purchases from said registered manufacturers/suppliers who will charge sales tax @ 17%. They said that the business of registered manufacturers/suppliers of packaging material will, therefore, come to a standstill and they will be forced either to close down or to de-register themselves and go in the un-organized sector.

They said that the problem will be aggravated in view of the fact that most of the large exporters/exported houses will obtain DTRE for import or local purchase of various items including packing material. They will import packing material free of customs duty and sales tax under the said scheme and there will be no need for them to make purchases either from registered suppliers or from un-registered suppliers. They said that this will cause loss of local economic activity resulting in huge revenue loss to the national exchequer.

"Even where the said exporters will make local purchases under the DTRE against zero rated invoices, the manufacturers/suppliers will be required to seek refund of input tax for supply against DTRE which may not in fact be available under the amending SRO 491(I)/2016. This will ultimately pile up huge amount of refunds of SMEs which are already working with every limited capital of Rs. 10 to 20 million", the LCCI office-bear- ers said.

They said that the above facts point towards one thing that registered SMEs manufacturing/supplying packing material to exporters will not be able to continue their businesses.