FED on cement to be abolished in three years

The federal government has decided to completely abolish federal excise duty (FED) on cement in the next three years. On the demand of cement manufacturers the federal government has announced several relief measures for the cement sector in the budget for 2011-12 to encourage the construction activity in the country.
Currently, according to All Pakistan Cement Manufacturers Associations (APCMA), the industry is paying federal excise duty @ Rs 700 per ton, 17 percent general sales tax, and 2.5 percent special excise duty. These taxes add around Rs 90 per bag to the cost of producing cement, which burden, according to the association, is highest in the world. The average cement price stood at highest level of Rs 390 per 50 kg bag in the domestic market.
Overall three incentives have been announced for the cement sector in the budget for 2011-2012. These include reduction of FED and sales tax and abolishment of special excise duty on white cement.
According to budget announcement, the federal government has planned to eliminate completely FED on cement sector in three phases. FED will reduce every year from next fiscal year and finally completely be abolished in fiscal year 2015.
At present, the cement sector is paying Rs 700 per ton FED on cement sales and a reduction of Rs 200 per tons has been proposed by the ministry of finance in the first year 2011-12.
With approval of this proposal, FED on cement will be reduced to Rs 500 per ton from next fiscal year, while the remaining Rs 500 per ton would be eliminated by equal reduction in next two years. According to budget announcement Rs 250 per ton will be abolished in FY2013 and Rs 250 per ton in FY 2014.
In budget, special excise duty on white cement has also been proposed to end from next fiscal year. Cement sector is paying some 2.5 percent special excise duty.
In addition, cement sector has also succeeded to get one percent reduction in sales tax and, like other sectors, now sales tax on cement sales will be 16 percent, reduced from 17 percent.
However, exemption of sales tax on cement/concrete blocks and bricks has been withdrawn to extend similar treatment in line with other inputs used in the construction industry.
Sources said reduction in the quantum of excise duty on cement and withdrawal of excise duty on white cement is basically aimed at encouraging construction activity which will result in adequate increase in employment opportunities.
Cement makers said these measures will help the cement industry to ascertain and facilitate cement exports.
They said that the measures announced in the budget will improve the viability of the industry as instead of raising the cement rates, the industry would be able to maintain the prevailing cement rates and giving a boost to construction business.