ISLAMABAD, May 26: The general sales tax (GST) has eventually turned out to be the largest factor contributing to the current heightening inflationary trend besides exchange rate, global oil prices and low interest rates, official statistics suggest. Tax officials told Dawn on Thursday that the growth in GST collection during the last five years was due to expansion of the scope of 15 per cent GST to electricity, natural gas and POL products in 1999-2000.
The tax officials collected more than Rs50 billion under GST in 2003-04 through utilities bills. The government also imposed 15 per cent GST on all kinds of fertilizers in 2001-02 and the same on vegetable ghee and cooking oil in 2002-03 to raise maximum revenue to meet the IMF’s conditionalitiess under poverty reduction and growth facility programme (PRGF).
The vegetable ghee/cooking oil alone have yielded more than Rs32 billion under GST in 2003-04, which has been collected indirectly form consumers with the price tag, which also pushed up the original price by 15 per cent. These items are consumed by or affect everybody irrespective of his income category and even those who live below poverty line. With an increase in the GST, there is an increase in the input cost, and consequently an increase in the prices of commodities.
Before 1999-2000, consumers were paying Rs24.40 litre for petrol and Rs10.66 litre for diesel. This surged to Rs45 per litre for petrol and Rs29 for diesel at present. Similarly, the levy of GST on fertilizers has resulted into increasing the input cost of the agri products which pushed up the prices of agriculture produce.
According to the statistics, for the last 54 years, the ministry of food, agriculture and livestock (Minfal) has apparently done no tangible work to increase the yield of different crops particularly the cash crops to meet the domestic demands.
The area under wheat cultivation was 8 million hectare in 1991, which was almost the same in 2004, which needed to be increased with the passing years by having more area under cultivation.
The consumer inflation measured by the consumer price index (CPI) has crept steadily upwards during the last few years. Inflation that stood at 3.58 per cent in 1999-2000, increased to 4.57 per cent in 2003-04 and surged to over 9.27 per cent in 10 months, from July-April, in the current fiscal year.
Due to these and other measures, the individual prices of 39 essential daily use commodities like ghee, sugar, flour, cooking oil, pulses, vegetables, meat and utilities have increased by more than 28 per cent across the country since October 1999.
Wheat flour during the last five years has increased by 50.28 per cent, wheat by 60.51 per cent, vegetable ghee 38.04 per cent, cooking oil 34.28 per cent, mutton 69.16 per cent, beef 70.25 per cent, milk 13.90 per cent, and rice by 35 per cent.
It was observed that prices of agricultural perishable items in particular, declined during the harvest and post-harvest season but started rising after some time. Price of these items particularly undergo phenomenal rise during Ramazan, Eid period. There is a need to evolve short and long term policies to off set this trend.
Market Analyst said that the government’s failure to check and control prices amid the absence of consumer right laws is another headache for consumers, who remain prone to the usual exploitation of shopkeepers, industrialists, and transporters.
On supply side, they said it is necessary to have crop estimation system for major crops, data on industrial stocks and production, data on government expenditure and credit extended to the private sector. The district governments should be involved in the process to monitor supply and demand of all essential items of daily consumption so that government could intervene to avert shortage that may fuel price-hike.
Besides, there is a need for strong regulatory bodies to check and determine prices of services. Although government has established regulatory bodies like Ogra, Nepra, Pemra but they have not been given the powers of determining the prices of services on actual basis.