ISLAMABAD, Jan 27: The Central Board of Revenue (CBR) has failed to generate revenue from value-added tax (general sales tax) on vegetable ghee, crude oil and cooking oil industries as it has reverted to the decade old system of deduction of tax at import stage.
Well-placed sources told Dawn on Friday that the revision of policy of tax collection from value-added to at-source collection showed the inability of the tax machinery to implement the concept of value-added tax effectively in the oil and ghee industries.
The CBR annually collects around Rs150 million as GST on VAT mode from value-addition of the local manufacturing of ghee and cooking oil, which is far less than the potential existed in the sector.
According to the sources, most of the local manufacturers were showing value-addition up to around 60 paisa per kg on their imported oil, which resulted in less collection of GST from the sector.
The CBR, instead of effectively carrying out audit of these mills that are evading taxes, is collecting Re1 per kg at import stage as federal excise duty to be collected as output tax on cooking oil or vegetable ghee. It has estimated to raise around Rs2.5 billion from the levy of federal excise duty on import of palm oil, etc., mostly used in the manufacturing of vegetable or cooking oil.
Thus, the CBR at a time would adopt two kinds of policy for the sector, which negates its claim of reforming the tax administration to implement the tax laws based on the universal concept.
The government has introduced GST in VAT mode to collect it under the federal excise act from those manufacturers who are operating their businesses in tribal areas, as the sales tax act was not extended to those areas at the request of the Pakistan Vanaspati Manufacturers Association (PVMA). But again this concept did not help much in raising maximum revenue from this sector.
A CBR official said the collection of GST from the local production of seeds, which were consumed in the manufacturing of ghee, was also very negligible as these people did not declare their production in returns.
The official maintained that it was not possible for the CBR to bring these people under the tax net as the local seeds were mostly used in the informal sector ghee manufacturing.
According to the sources, the notification SRO24 of 2004 issued on Jan 7 this year also created chaos in the edible oil industry, as it did not elaborate whether the Re1 per kg would be the final liability or it would be adjusted against inputs.