The reduction of sales tax rate from 17 to 7 percent on the import of canola and sunflower oilseed as well as 6 to 5 percent sales tax cut on the import of soybean oilseed to have an estimated revenue loss of Rs 8 billion to the exchequer. Experts said on Monday that in budget (2015-16) special focus has been laid on ghee and cooking oil industry by giving sizeable relief in sales tax on import of oil seeds.
The relief measure shall have burden of Rs 8 billion per annum on the national exchequer. The revenue loss at the import stage has been calculated on the basis of overall impact of reduction in sales tax rate on the income tax. At the import stage, the reduced rate of sales tax would also reduce the incidence of other taxes on imports. The reduction of sales tax rate from 17 to 7 percent on import of canola and sunflower oil seed and 6 to 5 percent sales tax cut on the import of Soybean oil seed, to have an estimated revenue loss of Rs 8 billion to the national exchequer.
The rate of sales tax has been slashed from existing 17 percent to 7 percent, ie, a decrease of 10 percent on import of Canola and Sunflower oil seed, whereas on Soybean oil seed the same is reduced to as low as 5 percent only. Whereas, there is no new tax or raise in existing tax regime is witnessed.
However, 2 percent income tax on purchase of locally produced edible oil by manufacturers of cooking oil, vegetable ghee or both is applicable vide clause (13C), Part II of the Second Schedule of Ordinance becoming infructuous due to efflux of time and replaced by insertion of new section namely 148A. Therefore the manufacturers of ghee/cooking oil shall continue to be charged with 2 percent Income Tax in respect of income accruing from locally produced edible oil in final mode.
The ghee manufacturers are exempted from sales tax vide entry no 24 of Sixth Schedule of Sales Tax Act, 1990 and instead pay lower rate of FED@ 16 percent, in addition to chargeable FED @ Rs 1,000/M Ton in value addition mode as a final discharge of sales tax liability on ghee/cooking oil vide S.R.O 24(I)/2006 dated 7th Jan, 2006. The rate of FED in value addition mode @ Rs 1,000/ M Ton is under review by FBR and likely to be enhanced by 100 percent up to Rs 2,000/ M Ton shortly, through notification.
The industry demand of increasing export quota under Duty and Tax Remission on Exports (DTRE) is also accommodated in the federal budget by raising it for Afghanistan and Central Asia from 1,000 M Ton per 90 days to 1,000 M Ton per month. The industry has hailed the budgetary measures being in line with their proposals and termed them effective against recent surge in imported finished products, hindrance in exports - in-competitiveness confronted by the local ghee and cooking oil industry. The manufacturing of ghee/cooking oil is likely to exceed 3.6 M Tons in year 2015-16 with 2.4 M Tons of imported edible oil and 1.2 M Tons extracted from indigenous and imported oil seeds as input raw material, they added.