August 27, 2006	Sunday	Sha'aban 2, 1427

KARACHI, Aug 26: The Central Board of Revenue (CBR), by withdrawing rebate of Rs2,960 per ton on export, has knocked out of business the ghee manufacturers not only from the Afghanistan market but also from domestic markets.

The action has paved the way for Kabul and Dubai based ghee dealers to dump their ghee in Pakistan, a leading ghee manufacturer said on Saturday.

An SRO issued on Aug 18, by the CBR announced reduction of duty drawback on export of vegetable ghee from Rs9,680 to Rs6,720 a ton which in fact is a levy of Rs2,960 on a ton of ghee export. The Afghanistan-based manufacturers enjoy the benefit of import of oil through transit trade without any payment of custom duty, sales tax and income tax.

A Pakistani ghee manufacturer and processor have to pay a total of Rs17,656 on import of a ton of oil. This includes regulatory duty, excise, sales tax and income tax.

The government had offered duty and tax remission rules for export (DTRE) facility to the ghee exporters under which import of raw material is allowed duty free.

But after observing a gross abuse of this facility by some unscrupulous ghee exporters, the government withdrew the DTRE facility and instead offered a duty drawback benefit.

The SRO issued last week, however, provided a duty drawback of Rs6,720 on a ton of ghee against a duty of Rs9,680 on a ton. In net terms the Pakistani ghee manufacturers are now under a levy of Rs2,960 duty on a ton.

They are facing a competition from Afghan ghee manufacturers, who enjoy total duty exemption on import under transit trade.

More than 0.1 million tons of ghee worth about $100 million is exported to Afghanistan in a year. After imposition of Rs2,960 duty on a ton, the ghee manufacturers fear losing $100 million market in Afghanistan and also a big market share in Pakistan, particularly in the NWFP and Balochistan.

The Afghan Transit Trade has been one of the main sources of smuggling into Pakistan that has hurt Pakistan’s industry. The government was forced to draw up a negative list for ATT, which had to be trimmed down after induction of Karzai government.

The Pakistan ghee makers have been agitating for long to put import of edible oil on negative list of ATT.