KARACHI: Farhan Ashrafi, Vice Chairman of Pakistan Yarn Merchants Association (PYMA) & convener FPCCI’s Central Standing Committee on Yarn Trading, and Khurram Bharara, former SVP, have demanded Muhammad Javed Ghani, Chairman Federal Board of Revenue (FBR) to withdraw the 1.5 percent turnover tax imposed on yarn traders and restore the previous rate of 0.1 percent. Otherwise, the majority of yarn traders will be forced to close their businesses, as the industry has already suffered due to the COVID-19 epidemic and most traders and businesses are facing severe financial difficulty.

A letter to the FBR chairman has brought attention to this important issue. Traders claim that even if business increases, the profit margin is likely to remain negligible if the tax rate of 1.5 percent is continued.

By virtue of SRO.333 (I) 2001 dated 02.05.2011, the traders of yarn had been subject to turnover tax at a concessional rate of 0.1 percent, which constitutes about 10 percent of their margin. Provision of the rate of minimum tax 0.1 percent was made under clause 45 (A) second schedule to the income tax ordinance 2001.

“Because of some oversight traders of yarn were not included in the purview of minimum tax under the first schedule Part-1 (Division IX) of the Income-tax ordinance 2001, which would be the correct approach to treat the levy of concessional rate on yarn traders, as is the case with various other sectors and persons”, the letter stated.

Due to this lacuna, a state of confusion remains about the levy of tax and frequent changes are made in the rate of turnover tax without consultation with stakeholders.

Khurram Bharaa said that to compound the misery of yarn traders an amendment was made through Finance Act 2020, whereby Yarn Traders have been taken out of the scope of clause 45A (Part IV of 2nd Schedule) and the exemption from the application of minimum turnover tax under Section 113 has been withdrawn, which prescribes 1.5 percent turnover tax. Accordingly, the yarn traders are how subject to turnover tax at the rate of 1.5 percent, which is way above their actual margin. Consequently, many traders of yarn have to discontinue their business unless the previous rate of 0.1 percent is restored.

Farhan Ashrafi asked the FBR chairman to remove the anomaly by inserting the provision of minimum turnover tax at 0.1 percent for the yarn traders in the first schedule Part-1 Division IX (exempting yarn traders from minimum 1.5 percent tax under section 113 of income tax ordinance 2001). He requested Javed Ghani for intervention in the matter will help to rescue the complaint tax-prayers, who are conducting a large volume of trade and sustaining the textile sector of Pakistan.


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