PVMA budget proposals: minimum tax liability be replaced with final tax liability

The ghee and cooking oil industry has suggested to the Federal Board of Revenue to replace the minimum tax liability with final tax liability for smooth imposition of 3 percent withholding tax on imported edible oil from next fiscal year (2012-13).
Sources told Business Recorder here on Friday that the Pakistan Vanaspati Manufacturers Association (PVMA) has submitted budget proposals to FBR for 2012-13. The structure of income tax on vegetable ghee/cooking oil industry before June 30, 2009 revealed 2 percent tax was applicable on import of raw materials under section 148(8) of the Income Tax Ordinance 2001, as final discharge liability.
The tax paid on import of packing material is refundable to manufacturers. Through Finance Bill, 2009, 3 percent tax was imposed on import of raw material under section 148(8) as minimum tax liability instead of final discharge. Tax paid on import of packing material has been converted as tax payable under section 148(8) of the Ordinance 2001.
It has been proposed to reinstate the status of 148(8) as final discharge of liability as FBR has admitted an error unwarrantedly imposed, and secondly the tax paid on packing material must be refundable as previously, to reduce the cost of production burden on vegetable ghee/cooking oil to provide relief to consumers.
The association has further proposed customs duty on imported Tinplate should be reduced to zero percent and sales tax to 5% for manufacture of vegetable ghee/cooking oil, to reduce the packing cost of the product for reduction in the production cost/sale price of vegetable ghee/cooking oil.
Tinplate importers are paying custom duty @ 20% on the C&F price of the imported Tinplate. Additionally, an Anti-Dumping Duty @ 27.33% has to be paid for Importers of Electrolytic Tinplate imported from Republic of South Africa. The overall custom duty paid is 47.33% which is really exorbitant. Due to increase in the imported price of tinplate used for fabrication of tins for packing Vegetable Ghee/Cooking Oil, the packing cost of 16 kg Tin now stands at around Rs 115, meaning thereby per kg packing cost of Vegetable Ghee/Cooking Oil is about Rs 10/- which also result in increase in the sale price of Vegetable Ghee/Cooking Oil to that extent.
Till 2002 the vegetable ghee was not liable to sales tax. Currently, the vegetable ghee/cooking oil sector had been paying the FED (Sales Tax) @ 16% at the import stage. The vegetable ghee/cooking oil being an essential Food Item of daily use should not be charged with the Sales Tax or the FED like other commodities which have been exempted from this Tax i.e. Wheat Flour (Atta), Rice, Pulses etc. Vegetable Ghee and Cooking Oil importers/manufacturers are already paying 16% Federal Excise Duty (FED) under Sales Tax Mode and 1% Fixed Value Addition which is Final, whereas Vegetable Ghee and Cooking Oil were exempted under the Sales Tax Act, 1990 (for importers & manufacturers) but this exemption is not available in the proposed VAT Act, 2010, sources said.
The association has further proposed that vegetable ghee and cooking oil importers/manufacturers are already paying 16% Federal Excise Duty (FED) under Sales Tax Mode and 1% Fixed Value Addition which is Final, whereas vegetable ghee and cooking oil were exempt under the Sales Tax Act, 1990 (for importers & manufacturers) but this exemption is not available in the proposed VAT Act, 2010. The PVMA has proposed that the vegetable ghee and cooking oil (importers/manufacturers) sector may be totally exempted under the envisaged VAT Act, 2010.
For the removal of levy of 0.25% warehousing surcharge on edible oil, the association suggested that the vegetable ghee manufacturers were liable to pay 1% Surcharge on import of Edible Oils over and above other levies such as Custom Duty, FED, Advance Tax, etc. The Government, on repeated requests of the PVMA in the Finance Act, 2007 (SRO 626(1)/2007 dated the 21st June, 2007) reduced the Warehousing Surcharge to 0.25% in spite of the fact that the Warehousing cost is paid by the importers of Edible Oil to the terminals for handling of imported Edible Oils involving no Government activity for the purpose said.