The ghee and cooking oil industry is confused over applicability of taxes on the import of edible oil under Finance Act 2013, as it is unclear whether industry would be subjected to one percent ‘further tax’ or two percent ‘further duty’ on supply to un-registered persons.
Experts told Business Recorder, here on Monday that the Finance Act, 2013 is not clear on the imposition of further sales tax at the rate of one percent or further excise duty at the rate of 2 percent. Similarly, it is unclear that the industry would be subjected to 17 percent federal excise duty at the import stage as standard rate of 16 percent FED remained unchanged in 2013-14. On the other hand, the standard rate of sales tax has been increased from 16 to 17 percent.
Details revealed that at import stage, edible oil imported by manufacturers of vegetable ghee/cooking oil is charged with Federal Excise Duty (FED) at the rate of 17 percent in lieu of Sales Tax applicable at production stage. This enhanced rate has taken effect from June 13, 2013 vide Finance Bill 2013-14 and amendments incorporated afterwards. In addition FED @ Re 1/Kg (Rs 1000/M.ton) is also levied and collected in value addition mode on edible oil imports vide notification no S.R.O 24(I)/2006 dated 7th January, 2006.
After the inception of Federal Excise Act, 2005 the edible oil and vegetable ghee/cooking oil vide entry no. 1 & 2 of Second Schedule read section 7 of said Act, are liable for collection of FED under sales tax mode with entitlement for adjustment with sales tax and vice versa.
Vide Finance Act 2013-14, the rate of further tax on supply of Vegetable Ghee/Cooking Oil to un-registered persons, FED @ 2 percent has been levied. However, in case of Sale Tax the rate has been fixed at 1 percent on supply of products to un-registered person.
Since vegetable ghee/cooking oil is in FED mode, therefore on edible oil at import stage FED in sales tax mode should have been @ 16 percent instead of 17 percent. Only in such case FED @ 2 percent can be charged on supply to un-registered person, otherwise further tax must be charged @ 1 percent (Sales Tax) to avoid anomaly.
In case FED, at import stage, is charged as 17 percent and further tax (FED) @ 2 percent is levied on supply of vegetable ghee/cooking oil to unregistered person then the net FED/Sales Tax on product shall become 19 percent which appears very high rather highest in food items category, experts added.