Sales tax proposal at manufacturer's level opposed

The proposal to levy sales tax on retail price at manufacturer's level will lead to de-registration of distributors and retailers, reverse documentation of the economy. Besides, it will also increase smuggling, discourage local manufacturing and will eventually hit hard the government revenues. These views were expressed by the Pakistan Biscuit and Confectionery Manufacturers Association (PBCMA) while commenting on the 2005-06 Federal budget.
PBCMA Chairman Maqsood Ismail, in a press statement here on Friday, said the step would have far-reaching consequences on that trade, hence the PBCMA had strongly opposed the same on the following grounds:
-- The new proposal will de-register the existing distributors and retailers. In the last five years, the government and the organised sector have worked hard to register more and more companies under the Sales Tax Act.
Today, almost 50 to 80 percent of various companies' sales come through the registered distributors and it is growing. This trend had an impact on smuggling and resulted in higher income tax collection. The new proposal will reverse this trend.
-- This proposal will also discriminate local manufacturers as they will be paying higher amount of the sales tax as against the imported goods, which have now been exempted from printing retail tax and will be paying sales tax on cost and freight (C&F) value at the import stage.
It is also inconceivable that biscuits and confectionery made locally will fall under higher sales tax regime as against the imported goods at lower sales tax brackets, which is totally against the concept of level playing field.
The PBCMA has, therefore, urged the Prime Minister to withdraw this new proposal for imposing retail tax at manufacturing stage.
At the same time, Maqsood Ismail congratulated the Prime Minister and his entire finance team for presenting a historical budget, which is "growth-oriented and will provide relief to the middle class."
The budget proposal regarding cascading customs tariffs in particular would have a far-reaching positive effect on the local industry, he said.