The government has collected Rs 11 billion extra general sale tax from on edible oil industry in 2006-07 by applying the proportionate price-tax formula without adjusting it to sudden rise in the edible oil prices.
"The government should have provided some relief to the consumers by making adjustment in the GST on palm oil when its revenue increased substantially to Rs 40 billion during current year as compared to Rs 29 billion the previous year", said Pakistan Vanaspati Manufacturers Association at a press conference here on Thursday.
Abdul Waheed, PVMA Vice chairman, Inam Bari, Member executive and Haji Akhter, ex-president PVMA highlighted that the C & F price of RBD palm oil, which is a major input used in producing vegetable ghee/cooking oil, had been increased substantially, ultimately affecting the consumers.
According to them, this price was $462 per tonne in July 2006, which has shot up to $785 per tonne on June 13 and in fact it touched $900 per tonne mark during the first week of June.
As a result, they said, the landed price of RBD palm oil had increased by Rs 24 per kg. They further added that the component of government taxes in the landed price which was Rs 17,150 per tonne in July 2006 has now increased to Rs 20,946 per tonne with an increase of Rs 3.80 per kg.
They proposed reduction in taxes to neutralise the price hike. The PVMA further expressed its reservations over GTS increase on tin-plat from 15 percent to 20, due to which price of tin-packed ghee would further increase by seven percent compounding the already high edible oil prices. They opined that there could be Rs 4 to 5 per kg increase in prices of edible oil after applying the new GST rate in July.
PVMA disagreed with the government to sell ghee and cooking oil products through utility stores. Instead, the government should reduce duties and taxes to benefit the industry for passing on the benefit to the consumers, they observed.
They also expressed reservations over non-imposing of GST on tin-plate in Fata/Pata, saying that it would damage the industry in other part of the country. Around nine units in Fata/Pata have competitive edge over the units in tariff areas, which needs to be checked, they said.
The PVMA representatives said that as a result of price hike in the international market, the Federal Excise Duty, which was Rs 5,628 per tonne in July 2006 increased to Rs 8,640 per tonne in June 2007, showing an increase of Rs 3 per kg. Withholding tax, which was Rs 1,282 per tonne in July 2006 increased to Rs 1,967 per tonne, they said, adding PVMA had proposed that the FED on edible oils should be fixed at Rs 5,700 per tonne and withholding tax be fixed within Rs 1,000 to 1,200 per tonne.
They said that it was proposed to offset the impact of government taxes, which had also been increased due to increase in the prices of imported edible oils. They further said that the PVMA had also proposed 100 percent refund of custom duty and federal excise duty should be provided on imported edible oils to the exporters so as to encourage exports of vegetable ghee, which has come down by 30 percent due to governments refund policy.
Responding to a query, they said that the Central Board of Revenue (CBR) had agreed to enhance duty drawback rates on the export of ghee and cooking oil to Afghanistan. In this connection, both the sides have agreed on a formula to revise the rates.
They further said that the Afghan market was dominated by the foreign brands of ghee and cooking oil. The share of Pakistani brands is just 30 percent, while 70 percent share is being dominated by the Malaysian, Indonesian and UAE brands. Pakistan has considerably lost its total share in the Afghan market.
In this regard, a fact-finding mission comprising Member Customs, Collector, Peshawar and other senior customs officials visited Afghanistan to determine the reasons responsible for losing Pakistani products in the neighbouring country.
The recommendations of the committee would be considered by the government to improve exports to Afghanistan, they said. They said that the payment of sales tax refund and duty drawback rates needed to be expedited, as it takes around 3-4 months for obtaining refunds from the collectorates.