Two percent ST on ghee supply chain likely

The Federal Board of Revenue has suggested introduction of sales tax at the rate of 2 percent on the value of supply being made by the wholesalers of vegetable oil and ghee with no facility of input tax adjustment from 2011-12. It is learnt here on Thursday that the FBR is taking some major steps to document the supply chain of major sectors including vegetable ghee/cooking oil industry.
The proposed revenue generation measure would result in estimated collection of nearly Rs 5 billion from ghee and cooking oil sector during the upcoming fiscal year. According to the FBR proposal received in the Ministry of Finance, the vegetable oil and ghee is exempt from sales tax in case manufacturers and importers are paying excise duty thereon under general sales tax (GST) mode. On the other hand, wholesalers including distributors and dealers of vegetable oil and ghee are legally required to pay 17 percent on their sales with the facility of input tax adjustment.
Despite administrative and enforcement measures of the FBR, most of the wholesalers, distributors and dealers of vegetable ghee and cooking oil remain out of the tax net, reflecting non-compliance b this sector. Any departmental effort to force such wholesalers to charge 17 percent sales tax on their sale invoices will not only be resisted but will also convey a wrong message to the public that FBR has imposed sales tax @ 17 percent on vegetable oil and ghee. Keeping in view the prevailing circumstances, the FBR has proposed to introduce sales tax @ 2 percent on the value of supply of such wholesalers of vegetable oil and ghee with no facility of input tax adjustment, sources added.