All Pakistan Ceramic Tiles Manufacturers (APCTM) have pleaded to the Federal Board of Revenue (FBR) not to include tiles industry in the Third Schedule of the Sales Tax Act 1990. Representatives of the industry met Chairman FBR Ansar Javed on Friday to plead their case and convince FBR on their stand.
Earlier, they had written a letter to the Chairman seeking his indulgence into a very serious issue which has emerged after the announcement of budget 2013-14 having devastating impact on the ceramic tiles industry in Pakistan. FBR has proposed to include "Tiles" in the Third Schedule of the Sales Tax Act 1990 whereby it has been made mandatory to print retail price on each box of tiles. "The impact of the proposed amendment is fatal for the survival of the local manufacturers, therefore, we request you to please do consider some factors before taking any final decision in this regard," the letter stated.
"A manufacturer has to produce new designs and varieties on daily basis in line with the newer varieties of imported tiles which are sold at different prices according to their respective manufacturing costs by the importers who have larger share in the local market," they added.
Moreover, they added there was a large number of importers involved in the import of tiles from various countries including China, Spain, UAE, Indonesia, Malaysia, Iran and many other countries but through the proposed amendment, FBR is trying to recover sales tax on full value addition up to retail level from the local manufacturers only. "The commercial importers possessing a major share in the domestic market are not required to pay sales tax on retail price," added the letter.
They said FBR was trying to control prices of locally manufactured tiles but there was no mechanism available with FBR to track imported tiles, which meant the customer would switch over to imported tiles to enjoy flexibility in prices. "Also, the commercial importers will immediately import huge quantities of tiles to grab the share of local manufacturers, compelling them to completely shut down their operations," the letter stated.
They said FRB should know that in the field of ceramic tiles prices could not be fixed for all customers because of the nature of customers asking for discounts such as corporate discounts, bulk buying discounts, territory-wise different discounts, and cash discounts. "The manufacturer gives all kinds of discounts to customers in order to retain them. There shall be complexity and disputes over quantum of discounts between sales tax department and the manufacturers on daily basis if this item is included in the Third Schedule," the association stated in the letter.
"Tiles may not be treated like FMCG products and the practicality of printing of prices on retail packing may be considered before making any of such amendment because tiles business is highly volatile and order based, the dynamics of tiles industry change every day," the letter stated.
The association said if prices were to be printed on tiles boxes, it would not be possible to convince the customer as to why there were two different prices for the products packed in similar packaging because the packaging material for two different types of tiles might be the same.
It is also feared that the importers would take undue advantage of this amendment and the manufacturers who are already suffering from injurious effects of dumping shall face another agony in the hands of proposed amendment. They said sales tax on value addition by the traders shall have to be borne by the manufacturers as the traders would never bear any additional impact of sales tax. "If we increase prices, we would lose our market share, as mentioned above, which shall not at all be fair with the local manufacturers."
Ceramics industry is providing employment to more than 15,000 households directly and to thousands of others indirectly and also paying billions of rupees in the shape of taxes and duties to the national exchequer.
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