Sales tax: Auto part manufacturers cry foul

To tide over the cash flow problems due to stuck up refunds, the industry has to take loans from banks resulting in increases in product costs. DESIGN: FAIZAN DAWOOD

LAHORE: Billions of rupees of the industries have been held up as the electronic system of the Federal Board of Revenue (FBR) has disallowed input of tax adjustments of provincial sales tax in Sales Tax Returns for the month of August, 2013, said Chairman of Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam), Munir Bana.

In a statement, Bana asked the FBR Chairman Tariq Bajwa to expedite these tax adjustments as it would become impossible for auto parts manufacturers to operate if their cash flow is usurped by their own government.

He said that the electronic system does not allow input of tax adjustment being claimed in sales tax return, as the FBR has failed to reach an agreement with the Sindh Revenue Board (SRB), Punjab Revenue Authority (PRA) and Khyber-Pakhtunkhwa Revenue Authority (KPRA) to resolve the crucial issue of allowing input tax adjustments of sales tax paid on services to the provincial governments.

The delay in release of these funds which run into billions has triggered a serious liquidity crunch for the manufacturers that might lead to closure of many industrial units, said Bana. Concerned authorities should take a realistic view of the matter and allow the adjustment/refunds of provincial sales tax to the manufacturers, as this tantamount to double taxation, he added.

Paapam Vice Chairman Usman Malik said it is becoming extremely difficult for the auto parts industry to carry on their business smoothly as sales tax refund claims have been blocked completely for the past several months.

To tide over the cash flow problems due to stuck up refunds, the industry has to take loans from banks resulting in increases in product costs.

Malik said that the problem is affecting exports of the country at a time when Pakistan needs foreign exchange and employment in the country.

He suggested that the role of FBR should not be only to collect taxes but to create an enabling environment through policies that enhance export, trade, commerce, industrialisation and thus job creation.

Published in The Express Tribune, September 24^th, 2013.