Karachi: The Karachi Cotton Association (KCA) has expressed concern over government plans to impose sales tax on cotton in budget 2015-16 to mobilise Rs50 billion in revenue.
In a statement issued on Tuesday, KCA Chairman Amin Hashwani said that such a move would be detrimental to the interest of growers and cotton production.
He further said that nowhere in the world sales tax is imposed on raw cotton because it inhibits growers from enhancing production and meeting the ever rising demand of raw material by textile industry.
The government has set a target for cotton production for 2015-16 at 15.49 million bales. With this, there is strong possibility that the country would be harvesting exportable surplus of around 1m bales.
The KCA chief argued that since 80-85 per cent of cotton crop is exported in the form of raw cotton, cotton yarn, cotton fabrics or value-added made-ups but upon levying sales tax on cotton it would have to be refunded at the export stage.
For the collection of sales tax on cotton, the government would be incurring huge expenses and will also bear administrative cost for refund of payments and thereafter insignificant amount of tax would be left with the government.
He said cotton is a highly priced commodity and exporters usually operate on small margins. Consequently, they cannot afford to stuck-up huge amounts in sales tax refunds for a period of six to seven months.
The KCA chairman urged the government not to impose sales tax on cotton in the forthcoming budget as it would have adverse repercussions for all stakeholders.