PSF manufacturers point out an anomaly in the Finance Bill 2024 – Business & Finance

LAHORE: Polyester staple fiber (PSF) manufacturers have drawn the attention of the federal government’s anomaly committee to the anomaly in the Finance Bill 2024 relating to sales tax.

In a letter to the Federal Government, copy available with Business Recorder, they said that the Finance Bill 24 has proposed to omit S.No.21 and the entries relating thereto from the 5th Schedule to the Sales Tax Act via clause 5(20).

They pointed out that S.No.21 zero-rates local supplies of raw materials to registered exporters licensed under the EFS.

Under the EFS scheme, all local inputs procured by the authorized exporters are entitled to zero rate under S.No.21 of 5th Schedule of the Sales Tax Act. On import, similar raw materials are exempt from sales tax under S.No.162 of Table I of 6th Schedule to the Sales Tax Act.

According to the manufacturers, Rule 880 of the EFS Scheme 2021 clearly stipulates that input goods may be imported free of sales tax and local input goods subject to sales tax must be supplied on a zero-rated invoice.

They have emphasized that the proposed omission of S.No.21 in the presence of S.No.162 of 6th Schedule has created a serious anomaly whereby local material is subjected to sales tax while the same material is exempt from sales tax on import. This anomaly would place local polyester staple fiber at a distinct disadvantage compared to imported fibre, they believed.

They have further maintained that the exporters would prefer to import these fibers duty-free under S.No.162 of the 6th Schedule of Sales Tax Act instead of purchasing local fiber optic with 18% sales tax for in case this budget proposal is ultimately implemented as such. Exporters would also be reluctant to purchase local fibers and then have to go through a cumbersome process to claim sales tax refunds.

To ensure a level playing field for the local industry and encourage import substitution, the PSF manufacturers have requested that this obvious anomaly be removed and the proposed omission of S.No.21 in clause 5(20) of the Finance To repeal Bill 2024. .