The Pakistan Vanaspati Manufacturers Association (PVMA) has demanded withdrawal of 3 percent withholding tax on edible oil in the forthcoming budget.
In its proposals for 2004-05 budget, the association said that withdrawal of withholding tax would benefit the industrialists by improving their financial liquidity position, and the consumers in the form of reduction in ghee and cooking oil prices in the market.
It said that zero-rated withholding tax at import stage was essential to give relief to the common man who is facing difficulty in getting necessitates, in particular kitchen items due to high prices.
The association cited various examples in support of its arguments. It referred the case of ships for scrap and other intermediary products.
The PVMA recalled that Pakistan Steel was allowed to import raw material without withholding tax to facilitate the buyers. It said that all cases in which withholding tax was abolished were less important than edible oil since being a kitchen item it is a necessity.
The association said that prior to the insertion/ addition of section 80 DD in the Income Tax Ordinance 1999, the importers of edible oil were entitled for adjustment of tax paid under subsection (5) of section 50 at the time of final assessment.
However, in 1999, section 80 DD was inserted in the Finance Act 1999. Under this section, tax collected under sub-section (5) of section 50 on import of edible oil as raw material by the industrialists is considered minimum payable tax.
In case the tax determined at the time of filing income tax returns exceeds the amount charged at the import stage, the additional tax is recovered from the units and in case tax liability stands less extra collected was not refundable.
The PVMA said that industrialists were paying custom duty ranging from Rs 9050 to Rs 10800 per ton in addition to 20 percent sales tax and 3 percent withholding tax being treated as minimum.
It said that duties and taxes on ghee/cooking oil are unprecedented since no other food item is so heavily taxed.
It claimed that high prices of ghee and cooking oil due to heavy taxation was creating liquidity problem for the industrialists and for the same reasons some of the mills have already closed down.
The PVMA called it as anomaly and proposed that it should be removed in the forthcoming budget so that ghee/ cooking oil industry could flourish and at the same time consumers get ghee/cooking oil at cheaper rates.