The All Pakistan Textile Mills Association (APTMA) has called on the Federal Board of Revenue (FBR) to provide clear guidelines regarding the Super Tax imposed under Section 4C, particularly for exporters. In a letter addressed to FBR Chairman Rashid Mahmood Langrial, APTMA highlighted that textile mills are facing significant challenges in meeting the tax obligations demanded by field offices.
The Issue at Hand
According to APTMA, FBR’s field offices have been insisting on the full payment of Super Tax in one go, creating financial strain on textile exporters. While the industry acknowledges the legal validity of the tax, the current economic conditions in the sector make it difficult for mills to pay the entire amount immediately.
Furthermore, inconsistent approaches across different FBR offices are causing uncertainty, complicating operations and planning for exporters.
Proposed Solutions by APTMA
To address these challenges, APTMA has suggested a multi-pronged approach:
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Adjusting Tax Liabilities Against Pending Refunds
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The association proposes that Super Tax liabilities be offset against all verified pending refunds of income and sales taxes, rather than limiting adjustments to a single tax year.
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Payment in Installments
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For any remaining tax liability after adjustments, exporters should be allowed to pay in reasonable installments. APTMA cites the Gas Infrastructure Development Cess (GIDC) case as a precedent, where the Supreme Court allowed industries to pay dues over 24 months.
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Calculating Net Tax Payable
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While determining Super Tax, already paid taxes, including advance payments, should be subtracted to avoid double payments. Only the net amount should be subject to installments.
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Use of Imputable Income for Exporters under FTR
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Exporters who were previously under the Final Tax Regime (FTR) should have their Super Tax calculated based on imputable income, essentially reverse-calculating the tax already paid to determine the equivalent liability under the Normal Tax Regime.
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Why This Matters
APTMA stresses that the textile sector is a major contributor to Pakistan’s exports but is currently facing serious liquidity constraints. A standardized and flexible approach to Super Tax would provide much-needed relief, ensure consistency across FBR offices, and support the sector’s continued growth.
By holding consultations with APTMA and other stakeholders, the FBR could issue clear guidance that balances legal compliance with the practical realities of exporters’ finances.
Looking Ahead
The industry is hopeful that the FBR will act swiftly to issue instructions and adopt a mechanism that allows for refunds adjustment and installment payments. Such measures would not only support exporters in managing their tax obligations but also strengthen compliance and reduce disputes with tax authorities.