The ghee and cooking oil industry has linked reduction in the prices of ghee/cooking oil in coming budget (2013-14) with the rationalisation of duties and taxes and procedural and legal changes in Customs Act, 1969 and Income Tax Ordinance 2001 from next fiscal year.
It is learnt here on Saturday that Pakistan Vanaspati Manufacturers Association (PVMA) has submitted its budget proposals for 2013-14 to the Federal Board of Revenue (FBR). The ghee and cooking oil has promised Rs 2 per kg decrease in price of ghee/cooking oil following reduction in customs duty from 20 to 5 percent on import of tin plates in budget (2013-14).
The association has proposed that the customs duty on imported tinplates should be reduced to 5 percent and sales tax to remain 16 percent for manufacturers of vegetable ghee/cooking oil, to reduce the packing cost of the product for reduction in the production cost/sale price of vegetable ghee/cooking oil. Resultantly, the benefit of Rs 2 per kg would be passed on to the consumers.
It has also proposed reduction of Rs 3000 per ton in the customs duty on the import of RBD palm oil/palm olein and soyabean oil. The industry has promised reduction of Rs 3 per kg in the price of ghee/cooking oil from next fiscal. The reduction of duty on imported edible oil by federal government for bringing down the price of vegetable ghee/cooking oil. The vegetable ghee/cooking oil industry is mainly dependent on the imported edible oils and as such the prevalent high rate of edible oils in the international market is the key factor for fixing prices of locally made vegetable ghee/cooking oil. To control and bring down the prices of vegetable ghee/cooking oil there is no option other than the Government initiative for reduction in taxes. Presently, the total duties/taxes paid by vanaspati manufacturers are around Rs 26,000/M.Ton. In the years 2010-11 and 2011-12, Pakistan imported Edible Oils to the quantum of 2.01 and 2.2 million Metric Tons, and in the year 2012-13, the import of Edible Oils is 1.9 million M. Tons.
Through Finance Act 2013-14, the association has also proposed that the FBR should reinstate the status section 148(8) of the Income Tax Ordinance 2001 as final discharge of liability and secondly the tax paid on packing material must be made refundable as per previous practice to reduce the cost of production on Vegetable ghee/cooking oil for consumers’ benefit. There shall be no burden on revenue collection however manufacturer’s complication in book keeping will be simplified.
The structure of income tax application on edible oil and vegetable ghee industries before June 30, 2009 was levied on import of raw material @ 2 % under section 148(8), as final discharge of liability and the tax paid on import of packing material was refundable to the manufacturers whereas it was converted in Finance Bill, 2009 as under: On import of raw material @ 3 percent us 148(7& 8), as minimum tax liability instead of Final Discharge The tax paid on import of packing material has been converted as tax payable under section 148(8). This change has adversely effected and also created lethality of assessment for manufacturers.
The association has proposed that the levy of sales tax on import/manufacturing stage may be reduced to 8 percent in the Budget for 2013-14. This will result in reduction of the market prices of vegetable ghee/cooking oil and will bring a sizeable relief to the masses. The industry has committed Rs 8-10/kg benefit to consumers in case sales tax is being reduced from 16 to 8 percent.
As per details, the exemption of the vegetable ghee/cooking oil from sales tax was available in the past. Sales Tax Act, 1951, was later on replaced by the Sales Tax Act, 1990. Till the year, 2002 the vegetable ghee was not charged with sales tax. Currently, the vegetable ghee/cooking oil sector is paying Sales Tax @ 16 percent at the import stage. The vegetable ghee/cooking oil being an essential Food Item of daily use should not be charged with the sales tax or the FED like other commodities exempted from this tax, ie, wheat flour (Atta), rice, pulses etc. Vegetable Ghee and Cooking Oil importers/manufacturers are already paying 16 percent Federal Excise Duty (FED) under Sales Tax Mode and Re 1 per kg Fixed Value Addition which is final.
It further proposed that the warehousing period limitation be enhanced from existing 30 days to proposed 60 days. It will help in mitigating the negative impact of fluctuating international prices. The vegetable ghee manufacturers were liable to pay 1 percent surcharge on import of edible oils in addition to customs duty, FED, Advance Tax, etc. The Government, on repeated requests of the PVMA in the Finance Act, 2007 (SRO 626(I)/2007 dated the 21st June, 2007) reduced the Warehousing Surcharge to 0.25 percent in spite of the fact that the Warehousing cost is paid by the importers of Edible Oil to the terminals for handling of imported edible oils involving no government activity for the purpose.
The Duty Tax Remission Export Scheme (DTRE) coverage is no longer available to the importers of the raw-edible oil which they process for export of the vegetable ghee/cooking oil, against the “export orders” in hand. For providing an incentive to the exporters of Vegetable Ghee and Cooking Oil manufactured from imported raw edible oils, the DTRE Scheme needs to be extended to manufacturers of Vegetable Ghee, who are capable/eligible of exporting the same to Afghanistan and the Central Asian States (CAS).
It propose Duty and Tax Remission for Export (DTRE) scheme coverage be extended to the importers who export their products (vegetable ghee/cooking oil) made from this stuff, the association added.