Budget 2019-20 and its implications
for the textile industry
Pakistan’s textile industry stands at a critical junction.
The budget for 2019-20 has just been announced. The Pakistani
Rupee continues to depreciate in value and stands at a parity of
152 against the US$ having lost a staggering 44% value since
November 2017. According to the Economic Survey, after
witnessing considerable growth in 2017 at 4%, the global
economic activity slowed during the second half of 2018 to 3.6%,
and is expected to reduce further to 3.3% in 2019.
The value-added textiles, however, have benefitted from the
depreciation of the Rupee primarily in terms of quantities
exported, while imports of textile machinery declined as a
consequence of devaluation. The budget unveiled by the PTI
government has two major implications for the textile industry.
Firstly, the zero-rated tax regime in vogue since 2012 of five
export-oriented sectors i.e. textile, leather, carpets, sports
goods and surgical goods is proposed to be revoked, and 17%
Sales Tax restored with a promise of prompt and immediate
repayments. Secondly, the duty-free imports of textile machinery
have been allowed in this budget.
There has been a sharp reaction from the textile sector again
revocation of the zero-rated status and imposition of 17% Sales
Tax. The rationale behind the decision is the misuse of the
facility by manufacturers in the local market and the benefit
being availed by non exporters. The reduced rates accordingly
are harming revenues and therefore these measures are strongly
contested by the value added sectors of the textile industry.
According to Rafiq Godil, Chairman PAKSEA, the industry will
suffer from severe liquidity issues as a result of the
reimposition of 17% Sales Tax. The cost of inputs has increased
dramatically due to the devaluation of the Rupee and now this
new financial crunch can severely damage the already lagging
Pakistan Readymade Garments Manufacturers and Exporters
Association Patron-in-Chief Ijaz Khokhar said the withdrawal of
zero-rated regime would make their exports unviable and result
in the closure of many small and medium sized companies.
According to Khurram Mukhtar, Pakistan Textile Exporters
Association chairman, the export industry will make the entire
supply chain run into a cashflow problem. He said the government
should have taxed the unregistered sector instead of burdening
the documented industry. There is, however, a realisation that
these fiscal measures are mandated by the IMF and that there may
not be a respite from the imposition.
Onward to ITMA 2019
ITMA 2019 is taking place in Barcelona from June 20-26, is
the biggest textile machinery exhibition held every four years
since 1951. With more than 1600 exhibitors and more than
200,000 visitors expected in 7 days, the event shall highlight
the best of textile technology the world has to offer. All
sectors of the textile industry shall benefit from the event.
The event this year is of particular importance from the
perspective of the issues faced by Pakistan’s textile industry.
There is an urgent need to invest in the sustainable
technologies that allow the industry to fiercely compete in the
global scenario. Pakistan is one of the key players in the
global textile scene and excels in the niche sectors such as
digital printing, denim, knits, garments and home textiles.
These value-added sectors contributed largely for keeping the
exports to a steady level.
A large number of visitors from are expected to attend ITMA
2019 with a keen interest in the spinning, weaving, finishing
and energy saving technologies. The duty-free imports of
machinery shall be an added incentive for the leaders of
Pakistan’s textile industry leaders visiting the exhibition. The
leading global players in the textile machinery technology
sectors are ready to greet their customers from Pakistan and all
over the world. Pakistan Textile Journal welcomes all our
readers to our stand at ITMA 2019.