The Federal Board of Revenue (FBR) is proposing the government to enhance Federal Excise Duty (FED) on sugar, beverages and edible oil to generate additional revenue in budget (2015-16). Sources told Business Recorder on Monday that the budget makers are examining different options for raising the incidence of taxes on these commodities/items its effect on common man.
Firstly, the Federal Excise Duty and Sales Tax on Production Capacity (Aerated Waters) Rules, 2013 was repealed vide SRO 569(1)/2014 dated 26.06.2014. Thus, from July 1, 2014, aerated waters manufacturer has reverted to the normal tax regime, where FED is chargeable on beverages concentrate @ 50 percent of its value, and FED @ 9 percent and sales tax @ 17 percent on aerated waters. Now, it has been proposed to enhance the rate of the FED on beverages from 9 to 15-16 percent.
Secondly, the FBR is reviewing the proposal of enhancing the rate of FED on sugar. Another proposal under examination is to charge standard rate of 17 percent sales tax on sugar and abolish 8 percent excise duty on the commodity. However, it is yet not finalised whether the said proposals are feasible for maintaining prices of these basic commodities in coming Ramazan.
Last year, the FBR had proposed 6 percent non-adjustable Federal Excise Duty (FED) on sugar in budget (2014-15) to generate an additional amount of Rs 6 billion. In last budget, the FBR had proposed reduction in the FED from 8 to 6 percent on sugar. However, it was proposed to replace 8 percent adjustable FED with 6 percent FED in non-adjustable (non-VAT) mode. But the proposal of the FBR was rejected and not accepted by the Ministry of Finance during budget finalisation of 2014-15.
At that time, FBR argued that the FED @ 8 percent (in VAT mode) was levied on sugar in lieu of sales tax. Despite half of the standard rate, input tax is being adjusted by the sugar industry on standard rate of 17 percent. Moreover, the input tax is also being claimed against fertiliser, building materials and other goods & services which are not directly used for the manufacture of sugar. As a result of applicability of FED on sugar, most of sugar supplies are made to unregistered persons without payment of 'further tax'. The 'further tax' is applicable on supplies to un-reregistered persons with the sales tax department but in case of sugar, FED is applicable on supply of the commodity. Thus, 'further tax' is not applicable in case of sugar. Therefore, it was proposed to impose FED in non-adjustable (non-VAT) mode @ 6 percent on sugar, but the proposal was not materialized last year.
Sources said that the government is expected to enhance fixed rate of Federal Excise Duty (FED) in value addition mode on import of edible oil from existing Rs 1 per kg to Rs 2 per kg or Rs 2,000 per metric ton (PMT). Vide SRO.24(I)/2006 dated 7th Jan, 2006 in value addition mode@ Rs 1/kg was levied on edible oils bearing HS Codes 15.07, 15.08, 15.09, 15.10, 15.11, 15.12, 15.13, 15.14, 15.15, 1516.2010, 1516.2020, 15.17, 15.18 as well as vegetable ghee and cooking oil.
The amount of Rs 1 per kg is a final discharge of liability and no input adjustment of sales tax/FED is admissible against manufacturing of vegetable ghee and cooking oil as explained in Federal Excise General Order (FEGO) No 1 dated 19th Jan, 2006. The federal excise duty (FED) in value addition mode is collected at import stage in lieu of its applicability at production stage.
This is over and above sales tax in FED mode @ 16 percent vide Section 3 of Federal Excise Act, 2005. The FBR is considering upward revision of fixed rate of value addition may be from existing Rs 1/kg to Rs 2/kg or Rs 2000/M. Ton on import of edible oil.