Import of edible oil/palm oil: FBR to seek cabinet's nod for reducing customs duty

The Federal Board of Revenue (FBR) will move summary to the federal cabinet for reduction in the additional customs duty from seven to two percent (five percent decrease) on the import of edible oil/palm oil. Official sources told Business Recorder here on Friday that the rate of additional customs duty was enhanced on the import of the palm oil from two percent to seven percent in budget (2019-20). In the next cabinet meeting, the FBR will move the summary through the Ministry of Finance proposing reduction in the additional customs duty on the import of edible oil.
Industry experts told Business Recorder here on Friday that the increase in additional customs duty from two to seven percent on the import of edible oil has resulted in increase in prices of cooking oil and also created serious disparity between imported soybeans oil and edible oil due much less duties and taxes on soybeans.
In this regard, the revised calculations with revenue impact have been submitted to the Finance Ministry about the impact of additional customs duty from two to seven percent on the import of edible oil. The data on soybean oil extracted from imported soybeans and enhanced taxation structure on edible oil revealed that the additional customs duty on the import of edible oil needs to be reverted to two percent to avoid massive raise in price of cooking oil.
They said the edible oils being essential item were attracting only two percent additional customs duty (ACD) vide SRO 630(I)/2018, dated 21st May 2018, which has been drastically raised to seven percent vide sub paragraph (iii) of subject SRO.
As per industry's interpretation, seven percent additional customs duty is designed for tariff slabs of 20 percent and higher, but since specific rate of CD is applicable on edible oils (PCT 1507.1000, 1511.9010, 1511.9020 & 1511.9030), therefore, by default highest slab of 7 percent is levied on this essential item.
As an instance, the assessed value of soybean oil is Rs 119,250/MT and this product attracts fixed rate of customs duty @ Rs 10,550/MT, which accounts for nine percent of the assessed value. Vide SRO under reference tariff slabs of less than 11 percent attracts only two percent ACD, hence it should have been continued with two percent, but since specific rate of customs duty was applicable on soybean oil, therefore, the said SRO positioned it in the highest slab of seven percent due to apparently an over-sightedness.
Due to increase in ACD by five percent, following net effect shall be borne by consumer of cooking oil: assessed value of soybean oil, Rs 119,250/MT; customs duty, Rs 10,550/MT; ACD as increased by five percent, Rs 6,490/MT; sales tax @ 17 percent on additional customs duty of five percent, Rs 1,103/ MT; income tax (WHT) @ 5.5 percent on ACD as increased by sales tax @ 17 percent, Rs 417/MT; and net effect of five percent enhancement in ACD, Rs 8,010/MT.
The other source of soybean oil is the oil extracted from imported soybeans, hence the two products ie. imported soybean oil and soybean oil extracted from imported soybeans are identical products.
It is reiterated that imported soybeans attract only three percent customs duty (CD) and two percent additional customs duty (ACD) thus totals to five percent only, whereas the identical product (imported soybean oil) is levied with nine percent of CD (Rs 10,550/MT) and seven percent of ACD and consequently totals at 16 percent.
This vast difference of over 11 percent or Rs 8,010/MT would not only increase the price of cooking oil but would also disturb the level playing field and promote the unwanted and undesired monopoly, they said.
In the light of foregoing, it is strongly recommended that ACD on edible oils may please be reversed back to two percent to avoid the jump in price of cooking oil and restore the level playing field for competitors.
In order to incorporate necessary corrections in subject SRO, the industry has proposed for issuance of 'amending statutory regulatory order' with following clause: In case of slabs of specific rates, if the rates are equal to zero percent; three percent and 11 percent, the rate of ACD shall be two percent. For slabs of specific rates under 16 percent and over 20 percent the rate of ACD shall be four percent and seven percent respectively." They said proposed amendment shall not only dispose of the issue in hand, but would also ease out the forecasted discrepancies on other goods, if any.