The government is reported to be inclined to make some much-needed changes in its policies concerning the ghee industry so as to create a level playing field for all involved.
It is actively thinking of revising the existing sales tax formula under which 20 percent GST is imposed on edible oil at the import stage and 15 percent on local production, with adjustments allowed on the basis of value addition.
The formula, introduced at the time of the last budget, has only created an excessive burden of paperwork for the revenue collectors to deal with on account of tax refund claims, while it has failed to enhance revenue collections that the government had hoped for.
It is not hard to guess why that is so. As long as there is room for adjustments, it will be used by unscrupulous elements to make false claims in collusion with the tax officials. Hence the sensible way to deal with the issue is to fix a uniform tax rate on edible oil imports at 15 percent, just like the 15 percent GST at the production point.
The ghee mills' other big problem relates to the seemingly unstoppable smuggling of the product from Afghanistan and also from ghee manufacturing units in the tribal belt that are exempt from all taxes into the tariff area.
The Pakistan Vanaspati Manufactures Association (PVMA), has therefore appealed to the government to withdraw exemption of sales tax that is enjoyed by the ghee units operating in FATA and PATA.
The exemption, PVMA rightly complains, works to the detriment of the ghee industry in the rest of the country, as the FATA and PATA producers sell their tax-free products at much cheaper rates.
The unfairness of the situation is too obvious to state. The government needs to look into the matter and do the needful to address the genuine objections raised by the PVMA members on this particular score.
The association also wants the government to review its decision to remove ghee and cooking oil from the negative list of Afghan Transit Trade (ATT). The Afghan companies, it says, are importing ghee and cooking oil directly in packed form, and selling the same in Pakistan, mostly in the Frontier province.
Since the Afghan imports are not subject to heavy taxation like in Pakistan, these products are sold at considerably lower rates than the locally manufactured ghee and oil products.
The problem though is not peculiar to the ghee manufacturers, and it has been a constant source of irritation and resentment for a number of other industries also.
The fact of the matter is that ATT is carried out under an international treaty governing the trading rights of land-locked countries. Hence the government cannot really dictate to Afghanistan as to what items it may or may not import.
Its responsibility is to ensure that none of the things imported by Afghanistan find their way back into Pakistani markets. It must take effective measures towards that end.
In the past, the concerned agencies used to make the convenient, and not altogether unconvincing, excuse that since the Pak-Afghan border happened to be extremely long and porous it was not possible for them to stop smuggling across it in an effective manner. But that situation has changed radically with Pakistani, Afghan as well as American troops maintaining a constant vigil on this border.
The excuse that the border cannot be properly guarded does not hold. The government must put its act together and stop smuggling of ATT items back into Pakistan, thereby addressing a fair and long-standing demand not only of the vanaspati ghee manufactures but also of so many others in the production sector.
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