Showing great concerns over reports that the implementation of value-added tax (VAT) proposed from the next financial might do away with all exemptions to zero-rated exporters, Islamabad Chamber of Commerce & Industry (ICCI) has demanded that VAT regime should not disturb the zero-rated status of export-oriented industries as it will particularly go against the commercial interests of smaller exporters.

Chairing a meeting of ICCI Sub Committee on Taxation, Zahid Maqbool, President, ICCI said that elimination of exemptions to zero-rated exports under VAT Act 2010 will create serious liquidity crunch and further push up the production costs particularly for smaller exporters. Therefore, government should refrain from taking such decisions that tend to damage the economy instead of improving it.

He said that elimination of zero-rated status given to export-oriented industries will hamper the exports of textiles, carpets, sports goods, leather and surgical instruments causing huge decline in the overall exports of the country.

He said that consequent upon exempting these industries from the payment of sales tax and giving them zero-rating had proved more beneficial to the economy as bulk of their production was exported. However, scrapping exemptions under the VAT Act will prove a nightmare for the smaller and medium sized exporters. 

Zahid Maqbool said exempting these sectors from the payment of sales tax had removed all unnecessary irritants in the promotion of exports and had had also put an end to complaints of delays in the payment of refunds and corruption that often resulted in financial crunch for many smaller to medium exporters. However, ending this facility under VAT regime could bring back the same old problems, which had forced the government to go for exemptions to get rid of them.

He said that such provisions will also discourage the much needed investment in the economy, thwarting all efforts of industrialists for industrial expansion. He said government should take all business leaders, especially of export sector into confidence on this particular issue to work out a win-win situation for all stakeholders so that a teamwork spirit could be developed to promote exports, improve taxes and strengthen the economy.

ICCI Vice Presidents Karim Aziz Malik and Ahsan Zafar Bakhtawari also addressed the meeting and showed their reservations on this issue.