FBR urged to revise duty drawback rates

LAHORE: The Pakistan Tanners Association (PTA) has asked the Federal Board of Revenue to revise upward the duty drawback rates on export of leather garments with retrospective effect to be given after May 3, 2009 when the rates of duty drawback were notified.


In a letter written to FBR chairman, the PTA chairman said leather was the second largest exporting industry of Pakistan a few years back. However, he said, annual exports of this sector in the last few years have not crossed the one billion dollar mark. On the contrary, the leather industries of Pakistan’s neighbouring countries such as China, India and Bangladesh have witnessed immense growth in exports.


Since 2007-08, leather exports of China, India and Bangladesh have increased by 47, 40, and 102 percent respectively while exports of leather from Pakistan faced a steep decline of 14 percent during the same period.


Poor governance, security situation and the energy crisis have led to Pakistan losing a whopping 39 percent share in global leather exports, the PTA chairman noted.


According to the PTA, exporting industries in the region are enjoying preferential treatment through government support, such as facilitating the cost reduction of exportable commodities including leather.


“Leather industries in theses countries, which are competing with Pakistani industries, are enjoying higher duty drawback/rebate rates and indirect benefits,” said the letter.


The letter also compares the various duty drawback rates in neighbouring countries on leather goods. The duty drawback on finished leather is seven percent in China, six percent in India, 12.5 percent in Bangladesh and 0.80 to 1.17 per cent in Pakistan. Similarly, in leather footwear, the rate is 7.5 percent in China, 9.2 per cent in India, 12.5 percent in Bangladesh and only 1.82 percent in Pakistan. In leather gloves, Chinese manufacturing enjoys 7.5 per cent, India 7.7 per cent, Bangladeshi 1.5 per cent and 1.54 percent in Pakistan.


The PTA chairman said these rates would become more advantageous when these are linked with the fact that their chemical industries in China and India are more developed and can feed many industries including leather.


Further, he pointed out that prevailing duty drawback rates on Pakistani leather are continuously decreasing.


“Downward revisions were unilateral and notified without consulting the PTA,” said the PTA chairman, adding that, at present, leather exporters are importing a majority of their process chemicals from abroad in order to maintain their export qualities.


“During the last decade, international prices of chemicals have gone up drastically and so the amount of duties to be paid on the import stage also posted parallel increase in CnF prices of chemicals,” he added.


The continuous downward revision in duty drawback rates along with an increase in chemical prices has compromised the leather industry’s export performance, he said. The PTA has embarked on revising duty drawback rates and prepared revision rates while taking into account the latest import prices of chemicals, fresh exchange rates and prevailing import duties.

From Print Edition

Source: THE NEWS