Oil seeds import by solvent plants: FBR proposes advance tax at five percent rate in 'minimum mode'

The Federal Board of Revenue (FBR) has proposed that advance tax at the rate of 5 percent in 'minimum mode' shall be levied on import of oil seeds by solvent plants to align oil seeds with edible oil imported by vegetable ghee and cooking oil manufactures in budget 2013-14.
Sources told Business Recorder here on Thursday that the FBR has forwarded this budget proposal to the Ministry of Finance for consideration in budget 2013-14. Another budget proposal is that the advance tax collected from ghee mills by solvent extraction units and oil mills at the rate of 5 percent shall be the 'minimum tax' on the income from the local purchases.
According to the details of the budget proposal of the FBR, the manufacturing activity involving oil mills, solvent plants, ghee mills, and feed mills is interconnected. The output of one manufacturing unit becomes the input of the other unit. In most of the cases these units belong to "Associates". Currently the process of taxation of such units allows for the siphoning of the revenue, owing to the non-arms length status of these transactions.
It is proposed that advance tax may be collected by the manufacturer from the purchaser of his product. This advance tax shall be minimum tax of the manufacturer when he translates the input purchased into the sales of the next product. The advance tax collected from ghee mills by solvent extraction units and oil mills at the rate of 5 percent from ghee mills shall be the minimum tax on the income from local purchases.
Sources said that the solvent plants are not making any worthwhile contribution and are obtaining refund of the tax withheld at import of oil seeds. The advance tax collected at the rate of 5 percent on the import of oil seeds, shall be the minimum tax on the income earned from such import to align with the ghee mills.
When contacted experts said that on import of oil seed WHT at the rate of 3 percent is applicable in adjustable mode, whereas WHT at the rate of 5 percent in minimum mode is levied on import of edible oil. The Solvent Extraction plants after extracting oil from seed consumes the same in their associated refining and manufacturing units for the purpose of manufacturing vegetable ghee/cooking oil and also adjust the WHT paid at import stage. Therefore, there is anomaly and withholding tax (WHT) collected on import of edible oil is much higher than oil seeds, they added.