Budget proposals: PVMA wants duty on imported tinplate be reduced to 5 percent

The ghee and cooking oil industry has proposed that the customs duty on imported tinplate should be reduced to 5 percent and sales tax should remain at 16 percent for manufacturers of vegetable ghee/cooking oil to reduce the packing cost of the product for reduction in the production cost/sale price of vegetable ghee/cooking oil.
According to the budget proposals of the Pakistan Vanaspati Manufacturers' Association (PVMA), tinplate importers are paying customs duty @ 20 percent on the C&F price of the imported tinplate. Siddique Sons, a manufacturer of tinplate, has increased packing price of container by Rs 30/per container of 16-kg packing which is comparatively higher than increase in the price of imported tin plate. Due to increase in the imported price of tinplate used for fabrication of containers for packing vegetable ghee/cooking oil, the packing cost of 16kg container now stands at around Rs 125, meaning thereby per kg packing cost of vegetable ghee/cooking oil is about Rs 8 which also results in increase in the sale price of vegetable ghee/cooking oil to that extent.
It is proposed that the Customs Duty on imported Tinplate should be reduced to 5 percent and sales tax to remain 16 percent for manufacturers of vegetable ghee/cooking oil, to reduce the packing cost of the product for reduction in the production cost/sale price of vegetable ghee/cooking oil.
Withholding tax on imported edible oils in PTR mode (minimum mode) is applicable vide section 148(8) of the ordinance. The rate of said tax was 2 percent which was raised to 5 percent vide circular No 6 of 2013 dated 19th July, 2013. Subsequently the rate was enhanced from 5 percent to 5.5 percent vide circular No 2 of 2014 date 17th July, 2014. However the rate has been substantially enhanced from 2 percent to 5.5 percent but is continuing in minimum mode vide section 148(8) of the ordinance. This anomaly has resulted into difficulty in book keeping and resulted into over 130 percent rate of tax on profits against applicable rate of 33 percent.
It is proposed to reinstate the status of 148(8) as final discharge of liability and secondly the tax paid on packing material must be refundable as per previous practice to reduce the cost of production on vegetable ghee/cooking oil for consumer benefit. There shall be no burden on revenue collection; however, manufacturer's complication in book keeping will be simplified.
Currently, the vegetable ghee/cooking oil sector is paying the FED @ 16 percent at the import stage, whereas has been granted exemption from sales tax vide entry No 24 of the sixth schedule of the Sales Tax Act, 1990. The vegetable ghee/cooking oil being an essential food item of daily use should not be charged with the sales tax or the FED like other commodities exempted from this tax, ie, wheat flour (atta), rice, pulses etc. Vegetable ghee and cooking oil importers/manufacturers are already paying 16% federal excise duty (FED) under sales tax mode and Re1 per kg fixed value addition which is final. On the pattern of sugar if necessitated the rate can be reduced to 8 percent at the maximum.
It is proposed that the levy of sales tax/FED on import/manufacturing stage may please be reduced to 8 percent in the budget for the year 2016-17. This will result in reduction of the market prices of vegetable ghee/cooking oil and will bring a sizable relief to the masses.
The vegetable ghee manufacturers were liable to pay 1 percent surcharge on import of edible oils in addition to customs duty, FED, advance tax, etc. The government, on repeated requests of the PVMA in the Finance Act, 2007 (SRO 626(I)/2007 dated the 21st June, 2007) reduced the warehousing surcharge to 0.25 percent in spite of the fact that the warehousing cost is paid by the importers of edible oil to the terminals for handling of imported edible oils involving no government activity for the purpose.
It has been proposed that the warehousing period limitation be enhanced from existing 30 days to proposed 60 days. It will help in mitigating the negative impact of fluctuating international prices.
Vegetable ghee/cooking oil industry is mainly dependent on the imported edible oils and as such the prevalent high rate of edible oils in the international market is the key factor for fixing prices of locally made vegetable ghee/cooking oil. To control and bringing down the prices of vegetable ghee/cooking oil there is no option other than the government initiative for reduction in its taxes. Presently, the total duties/taxes paid by vanaspati manufacturers are around Rs 24,000/matric ton. In the years 2013, 2014, 2015 & 2016 Pakistan imported edible oils to the quantum of 2.31, 2.44, 2.69 & 2.7 million tons. It has been proposed that the reduction of Rs 3000 per ton in the customs duty on the RBD palm oil/palm olein and soybean oil may please be made.