ISLAMABAD: Any increase in prices of local ghee and cooking oil is merely due to fluctuation in palm/ edible oil prices globally and nothing to do with the taxation structure on the edible oil industry in Pakistan.
Talking to Business Recorder here on Wednesday, Abdul Waheed former chairman, Pakistan Vanaspati Manufactures Association (PVMA) informed that present government has adopted a balanced tax policy approach for the essential commodities by not increasing taxes on these items through Finance Act 2024. However, if there is any slight raise in the prices of ghee and cooking oil locally, it is only due to an increase in international prices of inputs. The global increase in prices has a direct impact on local production of ghee and cooking oil, he reminded.
He said we are also working to increase the indigenous production of oil seeds so that our dependency on the imports can come down.
To a query, he said that the government has suffered annual revenue loss of over Rs 100 billion due to exemption available to the units of newly merged districts. The government has extended tax and duty exemptions for former Federally Administered Tribal Areas (Fata) and Provincially Administered Tribal Areas (Pata). It is a fact that the massive misuse of exemptions during last six years has devastated steel, ghee industry as well as many other industries resulting in revenue hit of hundreds of billions to nation’s exchequer, he said.
At the time of the merger of the erstwhile Fata/Pata in KPK in 2018, tax exemptions were given to industry in erstwhile Fata Pata/ also called the newly merged districts (NMDs) for 5 years and the facility was further extended for another one year till June 30, 2024. The amended Finance Bill 2024 has extended sales tax exemption on supplies and imports of plant, machinery, and equipment for installation in erstwhile tribal areas and of industrial inputs by the industries located in these merged districts till June 30, 2025.
Abdul Waheed stated that the Federal Board of Revenue’s (FBR) new transformation plan covers measures to check smuggling particularly under the Afghan transit trade. He appreciated FBR Chairman’s efforts and enforcement plan to control smuggling at border areas with the help of provinces and law enforcement agencies.
According to him, the policy of Fata/ Pata tax exemptions has already wiped-out a lot of domestic steel & ghee industry, and the industry located in Punjab & KPK is the worst hit. It is very unfortunate that more than 60% industry of Khyber Pakhtunkhwa located in Hattar Industrial Estate, Hayatabad Industrial Estate, Gadoon Industrial Estate have already been closed. In last five years several steel units in Hattar, Gadoon and Hayatabad witnessed closure.
It was argued that due to weak administrative controls, perpetrators taken advantage of the tax incentives and abused the law by selling tax-free goods in settled areas that undercuts the tax paying industry. These exemptions were so badly misused that around 92% of the steel and ghee produced in NMDs is smuggled to the settled areas without payment of Sales tax. Also, the raw material is being imported without payment of taxes in the name of units located in NMDs.
He highlighted that the goods produced in the non-taxed areas are blatantly sold in rest of the country/ taxed areas without the levy of Sales Tax. These exemptions are pampering a very small fraction of 2% of industry in Fata/ Pata at the cost of devastation to 98% local industry. Due unfair & discriminatory policy of Fata/ Pata the local industry has crippled during last six years. Actually, government is providing these tax incentives as weapon to these tax free factories to go and kill tax paying units in the tax paying areas. This is a great tragedy with the investor of this country.
Copyright Business Recorder, 2024