KARACHI: Milk producers have passed on the 18 per cent increase in general sales tax (GST) to consumers, while flour millers will raise prices shortly.

For example, the price of one litre of Olper milk has risen to Rs360 from Rs295 in June. Other companies have also followed suit.

“The overall increase in the price of infant formula, fortified milk products and packaged milk items comes to 25pc after implementation of the new taxation measures relating to general sales tax and tax on filers and non-filers,” an official at a milk-producing company told Dawn.

Confusions

Several issues have affected the market. In the Finance Bill 2024, the government has imposed a 2.5pc advance income tax (AIT) on non-filer retailers, while filers will pay 0.5pc AIT. In addition, a 4pc general sales tax (GST) is imposed on non-registered retailers.

He said that by doing this, they have made the whole fast-moving consumer goods (FMCGs) sector as “withholding agents.”

Another big problem is that the FMCG sector and its distribution network sell products to 90pc unregistered retailers by default and claim this tax.

However, retailers have lashed out that this is not the prerogative of manufacturers and that they will not pay any such income tax.

The company official said the government has conveniently passed the buck and the onus of collecting taxes onto the consumer goods manufacturer instead of enforcing structural reforms to bring retailers into the tax net.

Since the new taxation measures took effect on July 1, FMCGs witnessed the return of 30-40pc of despatched consignments by unregistered retailers. “This situation will play havoc on the overall supply chain of large manufacturers that are continuously procuring raw materials and producing goods to meet market demand,” the official said.

If retailers and other market stakeholders continue returning goods, manufacturers will have no other option but to curtail raw material procurement and scale down production. “This situation will lead to lower sales of perishable items and will equally hit farmers,” he added.

Flour price shock

Pakistan Flour Mills Association (PFMA), Sindh Zone, Chairman Chaudhry Aamir Abdullah has projected a price hike of Rs5.5 to Rs9 per kg in various flour varieties after enforcement of taxation measures relating to filers and non-filers (retailers, wholesalers and distributors).

He said the association had asked the prime minister and relevant authorities not to impose new taxes, which would directly affect consumers, especially people with low incomes.

“In case we do not get any positive response from the government, we will have no choice but to jack up prices from next week,” Aamir warned.

He said the millers could not collect tax from the market stakeholders as only 2pc Pakistanis pay taxes, while the sales tax would be collected from 98pc of the population.

Published in Dawn, July 5th, 2024