The federal government is contemplating to levy a 15 percent Reformed General Sales Tax (RGST) on poultry feed and its processed products by with withdrawing zero rating on processed branded chicken, while chicken and eggs will remain exempted.
The Pakistan Poultry Association (PPA) has opposed the RGST on the poultry sector and withdrawal of exemption/zero rating on processed chicken and urged for continuation of zero rate regime for poultry sector. Chairman Pakistan Poultry Association Khalil Sattar along with Abdul Maroof Siddique convenor press and public relation and Lal Buksh Kolachi chairman southern zone, while addressing a press conference here on Tuesday said that Poultry feed contributes 80 percent to the input cost. A 15 percent increase would undoubtedly increase the cost of Grandparents, Parent Stock, Broiler and Egg production operations.
"Poultry farms will shut down, besides massive increase in chicken prices will observe, if RGST imposed on poultry sector," he warned. In the face of losses, he had no doubts that a large number of farms will close down and the prices of chicken meat could, in the face of short supply, increase by 100 percent from Rs 175/Kg to Rs 350/Kg. He emphasized that this phenomena of short supply and high prices was demonstrated as an aftermath of bird flu when the prices had soared more than 150 percent.
He said that presently day old chicks are being sold at less than 1/3 the price and broilers are being sold at 20 percent below the cost, while eggs at 32 percent below the cost. RGST will be the final nail in the coffin. The levy of RGST on poultry feed is against all norms, principles and philosophy of the GST. If the output is exempted the input cannot be subjected to GST, he justified.
The experiment of levying GST in the year 1996 resulted in a sharp decline of 45 percent in poultry production, which resulted in a price spiral of not only chicken and eggs but also mutton and beef. The sales tax was consequently withdrawn by the Government in 1997 to put the poultry sector back on its rails.
He said that in order to keep the input cost low, the Government of India, Bangladesh, Thailand, Iran, China and even the very affluent countries in the EU, Australia, New Zealand, and many states in the USA have either exempted or zero rated poultry feed, chicken and eggs.
The Chairman further emphasized that withdrawal of zero rating on processed, branded, value added chicken attracting 15 percent GST, would result in defeating the Government's own policy of 2006 when the Ministry of Food, Agriculture & Livestock and Ministry of Commerce had launched a policy of encouraging value addition to attain qualitative and quantitative objectives and more importantly bringing about stabilisation in poultry product prices to expand the production base for ultimate objective of exports.
He further informed that during 1976-2009, eight out of nine processing plants had closed down in the face of challenges from the unorganised street side slaughter. Thus, to provide a level playing field, the Government in 2008 announced zero rating of poultry processing, which encouraged setting up of two more processing plants. The levy will increase the price of skinless whole chicken by Rs 31/Kg and boneless chicken by Rs 51/Kg increasing the gap between the organised and unorganised sector, he added.
He said that chicken is in the reach of all class of consumers as was documented in the Household Integrated Economic Survey 2007-08, which showed that a consumer spending Rs 4121 per month on food spends approximately Rs 135 on poultry products, Rs 110 on beef and only Rs 15 on mutton. As such, the levy of GST will overburden consumers.
The Chairman said in UK and rest of the EU though the per capita income is above $30000 per annum and the need for revenue is extremely high, yet all food items including branded, processed, frozen, ready to cook, fully cooked, etc are zero rated for VAT/sales tax. Even in the USA, many governments have exempted prepared food from the levy of VAT/sales tax.
He emphasised that processing plants were an essential requirement for food safety and security. The greatest danger in transporting of live birds to the markets and household was transmission and spread of viral and bacterial diseases endangering not only the poultry but human population as well.
In the aftermath of recent outbreaks of Avian Influenza, a number of countries banned the sale of live birds and gave incentives and patronage to processing sector. Since we currently process only 0.5 percent of the live birds the policy of encouragement needs to be continued.
The Chairman declared Poultry sector provides more than 1.5 million predominantly rural jobs for the socio economic uplift of the downtrodden rural populous. The result of GST imposition will spell out unemployment and bankruptcy of scores of medium and small farms.
He urged the government not to change the current GST taxation status of the entire poultry sector as the sector is making tremendous contributions in providing protein to fight malnutrition and under-nutrition in a nation where one out of every five children dies before attaining the age of five years because of malnutrition and under-nutrition. Today the real price of chicken is 9.75 percent cheaper than it was in the year 1998-99 whereas, during the same period, mutton and beef prices have increased by 130 percent and 153 percent, respectively.
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