Karachi Cotton Association opposes proposal to impose sales tax on raw cotton

Karachi, April 14, 2015 (PPI-OT): Mr. Amin Hashwani, Chairman, the Karachi Cotton Association has expressed great concern over the report appearing in a section of Press on 24-03-2015 to the effect that the Government seeks to impose a Standard Sales Tax on Cotton in the Federal Budget 2015-16 with a view to generate about Rs. 50 billion revenue.

The KCA has traditionally opposed such proposals to impose Sales Tax on raw cotton, as it discourages production and inhibits the smooth flow of exports and runs counter to the laid down Government policy of encouraging cotton trade in the country. Sales Tax generally is not imposed on Raw Cotton globally.

The Government of Pakistan has set a target for Cotton Production 2015-16 season at 15.49 million bales. With this, there is a strong possibility for Pakistan to potentially export a million bales of raw cotton.

Nearly 80%-85% of the Cotton Crop is exported in the form of Raw Cotton, Cotton Yarn, Cotton Fabrics, Garments and Cotton made-ups and Sales Tax, if levied on Raw Cotton, would be refundable thereon at the export stage. Taking into consideration, substantial expenses involved in Tax collection, administration and in the refund process, the balance available amount to the Government would be comparatively insignificant.

Cotton is a highly priced commodity and the exporters of raw cotton usually operate on narrow margins. They, therefore, cannot afford to keep substantial borrowed amounts struck-up by way of payment and refund of Sales Tax for a 6-7 months, or even longer, as was the case in the past. This would create serious liquidity problems for the cotton exporters, and eventually cotton exports would adversely suffer and compromise the interests of the cotton Growers and Ginners.

Keeping in view the importance of export of cotton/cotton products to the country’s economy, the Association strongly urges the Government NOT TO IMPOSE SALES TAX ON RAW COTTON in the forthcoming Federal Budget and keep Raw Cotton exempted in order to avoid adverse repercussions for all stakeholders and the general public.

For more information, contact:
Karachi Cotton Association
The Cotton Exchange I.I Chundrigar Road,
Karachi, Pakistan.
Phone: + (92)242-5007, + (92)241-2570, + (92)241-6497
Fax: + (92)241-3035, + (92)241-2580
Email: contact@kcapak.org