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ISLAMABAD: The government has constituted a committee to analyse a proposal of the domestic industry to impose general sales tax (GST) or duty on imported DAP fertiliser.

Sources told Business Recorder here on Monday that the decision was made during the last meeting on issues regarding DAP fertiliser convened at the Ministry of Industries and Production under the chairmanship of the Syed Murtaza Mahmud Minister of Industries and Production.

The committee comprising officials of the Industries and Production; Finance Division, Commerce Division, National Food Security and the FBR would determine the cost of production of the local companies as compared to the imported DAP; assessment of imported DAP and value of raw material used in the production of the DAP etc and subsidy to the industry.

Secretary of Industries and Production apprised the forum that the Fauji Fertilizer Bin Qasim Limited (FFBL) has approached the ministry with a request that due to the exemption of output GST after Finance Bill 2022-23, the FFBL being the sole manufacturer of the DAP, is at a disadvantage with reference to the importers of the DAP.

The FFBL had proposed that either the GST at input stage for FFBL may be exempted or imported DAP may be made subject to GST or duty may be imposed at the import stage of the DAP fertiliser.

The FBR secretary customs (Tariff) informed that all fertilizers were being imported at zero percent Customs duty and the DAP was also being imported from China with whom Pakistan had a Free Trade Agreement. In order to raise the rate of Customs duty, China must agree on the subject proposal.

Fertilizer spending at record high

The chief sales tax operations FBR said since Pakistan was in the middle of the IMF program, GST would not be the preferred option. He suggested that before making the case for GST imposition or imported DAP, review of cost, profit margins and gas subsidy of the domestically produced DAP by the FFBL should be done for making an informed decision.

The director general (Agro) Ministry of Commerce stated that the Ministry of Commerce was also in receipt of request from the FFBL regarding permission of export of the DAP. However, he suggested that FFBL’s request needed to be considered in a holistic way as off take for DAP had decreased significantly. Further, the FFBL was at a disadvantage with reference to imported DAP and the prohibition of export.

The joint secretary Finance Division stated that a thorough review of the cost of production of the FFBL was needed to ascertain the request made by the FFBL. Imposing GST on the imported DAP or granting exemption of the GST to the FFBL appears to be a unit-specific policy.

The Minister of Industries and Production informed the meeting that the FFBL was the sole producer of the DAP in Pakistan and in fact constituted domestic industry and we need to take into consideration the genuine concerns of the domestic industry, though it was also dependent on imported raw material (Phos Acid).

However, the FFBL was inefficient ad imported DAP was cheaper. As the international prices of the imported DAP had fallen lately it had pushed FFBL/FFC to sell the DAP at import parity price. In these circumstances, the imposition of the GST on imported DAP might not be feasible.

Copyright Business Recorder, 2023

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