KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) has urged the government that the position prior to Finance Act, 2019 shall be revived by abolishing Federal Excise Duty (FED) on fruit juices. This would increase the investment in the sector that would generate tax revenue.
The chamber noted that through Finance Act, 2019; 5% FED is levied on fruit juices. In addition to FED, Juices are already subject to Sales Tax @ 17% on retail prices. Fruit Juices are consumed by Kids as source of energy for them and are not luxury products. The imposition of FED has unnecessarily created additional cost for end consumers.
The chamber pointed out that excessive FED is charged on supply of beverage concentrate and beverages. Currently, concentrate is chargeable to FED @ 50% ad valorem being highest rate of FED under Federal Excise Act, 2005. Beverages are charged to FED @ 11.5% on retail price. Beverages are also subject to General Sales Tax on retail price and Income Tax at the time of supply.
KCCI proposed that FED on beverages was reduced from 12% to 6% through Finance Act 2011 without corresponding reduction in rate of FED on beverage concentrate. Rate of FED may be reduced on beverage concentrate from 50% to 25% and on beverages from 11.5% to 5% as beverage are not anymore a luxury item and is consumed by all income groups. Benefit of reduced FED would give relief to the manufacturers from excessive burden of taxes and would reduce extra cost of business of beverages. This would help to reduce consumer prices and increase consumption.
Concurrent levy of FED and Sales Tax on manufacturing constitutes double taxation resulting increased cost of production rendering the vulnerable industries uncompetitive and encourage smuggling. In addition to these indirect tax and duty, beverages are also subject to advance income tax under Section – 236G and 236H of the Income Tax Ordinance, 2001. Further, income of such manufacturers of beverages is also subject to Normal Corporate and Super Tax.
The chamber proposed FED on manufacturing should be phased out as the Federal Excise Law is outdated and it has been commitment of successive governments to abolish this colonial era tax. Benefit of this would not only enhance competitiveness of the industries, expand the tax base & registered / documented economy and discourage smuggling but would also result in growth and increase the investment.
Copyright Business Recorder, 2021
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