KARACHI, Feb 25: President, Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Riaz Ahmed Tata has said that the government's decisions to exclude the vegetable ghee and cooking oil mills from the DTRE rules and their removal from the negative list for Afghan Transit Trade will greatly hurt the industry.
He said this industry, which adds 30 per cent value in its production and provides an essential commodity to the local market and for exports, will be rendered uncompetitive.
Due to un-checked smuggling and inequitable government's policies, 50 per cent of the production units are already closed and if the government's recent decisions are enforced, the remaining vegetable ghee and oil-manufacturing units would stop their operations.
In a statement, the FPCCI said that the removal of ghee and cooking oil mills from the DTRE rules will have negative financial consequences as a lot of cash flow will unnecessarily be stuck up which, in the past, when the raw materials were imported under DTRE regime, were free of government's levies. The difference between duty draw back and DTRE schemes is as follows:
On duty draw back, 3 per cent income tax is paid (Rs1,565/- per ton) at the import level. Unfortunately due to section 148(8) of Income Tax Ordinance, 2001, 3 per cent paid tax is not adjustable only in case of ghee producing units.
Exceptional ruling against the ghee industry is enforced despite, although the member exports, CBR was of the opinion that the 3 per cent income tax is adjustable.
Under duty draw back, all duty and taxes such as sales tax, customs duty, income tax, etc., are payable at import level. Subsequently, customs duty and sales tax can be applied for refund through different department, which normally takes three to six months for repayment with considerable efforts, time and cost.
Under DTRE scheme no government levies are payable for raw materials procured to produce exportable products and thus cash flow is saved for use in operations.
Removing vegetable ghee and cooking oil from the negative list for transit trade to Afghanistan will also have grave negative repercussions on the local industry which will lose its local and export market share to unrestricted inflow of imported Malaysian and Singaporean products into Pakistan, as import of ghee and cooking oil is allowed free of duty, sales tax and income tax, FPCCI chief said. The total amount of income tax, sales tax and duty currently is Rs21,030 per ton.
He urged the finance minister and the chairman, CBR, to reverse the government's recent decisions to exclude vegetable ghee and cooking oil units from the DTRE scheme.
Our Reporter from Islamabad adds: The ghee manufacturers have asked the finance minister to re-include the vegetable ghee in the negative list of Afghan Transit Trade (ATT) to save the local industry from losing the export and local markets.
The ghee manufacturers in a letter to finance minister, copy of which was made available to Dawn on Wednesday stated the exclusion of vegetable ghee from the ATT negative list would result into inflow of imported Malaysian and Singapore products back into Pakistan.
They further said that the removal of ghee and cooking oil from the DTRE scheme would also have a great negative impact on export from Pakistan. They urged the government to allow import of vegetable ghee and cooking oil in the DTRE scheme.
The total amount of income tax, sales tax and customs duty currently was Rs21,030 per ton. They further said that ghee units were already suffering from cash flow because of non-refund sales tax claims since the starts of June 2002 and average Rs40-50 million were payable by the sales tax department to the units.