Increase in taxes on the import of edible oil in the upcoming budget for FY2018-19

Increase in taxes on the import of edible oil in the upcoming budget for FY2018-19

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ISLAMABAD: The Federal Board of Revenue (FBR) has sought an increase in taxes on the import of edible oil in the upcoming budget for fiscal year 2018-19, which, if granted, will ultimately jack up cost of doing business for the domestic cooking oil and ghee manufacturers.

The cooking oil and vegetable ghee industry primarily relies on edible oil imports and determines prices of its products by monitoring cue from price movements in the international market.

A senior government official revealed that FBR had presented a summary in a recent cabinet meeting suggesting increase in federal excise duty on edible oil from 16% to 21.5% as well as imposition of 1% income tax on the industry at import stage.

However, the cabinet shunned the proposal with a directive to the FBR to re-analyze and submit the proposal again at the time of budget announcement for its inclusion in the Finance Bill.

In another proposal, the FBR suggested increasing excise duty on the import of edible oil, vegetable ghee and cooking oil from 15% to 20% for the Federally Administered Tribal Areas (Fata).

However, the decision on that proposal too was deferred by the cabinet, which told the FBR to come up with the proposal at the time of budget announcement for its incorporation into the Finance Bill.

Moreover, according to an official of the Ministry of Industries and Production, domestic oil and ghee manufacturers had been pestering the government to cut-down taxes on the import of vegetable oil in a bid to shield the industry.

The cabinet was informed that edible oil, vegetable ghee and cooking oil were subjected to 16% excise duty under First Schedule of the Federal Excise Act 2005 besides a fixed excise duty of Rs1 per kg at the import stage under a Statutory Regulatory Order (SRO) issued on January 7, 2006.

There was also an additional 5.5% burden as minimum income tax. However, Fata paid 15% excise duty.

The Senate, in its recommendations for the Finance Bill 2017, had proposed increase in the excise duty rate from 16% to 21.5% as well as 1% income tax at the import stage.

The FBR agreed to the proposal of providing an even playing field for the oil and ghee manufacturers in tariff areas in relation to their counterparts in non-tariff areas.

During the course of discussions, it was pointed out that the federal government had initially provided incentives for Fata in an attempt to encourage the setting up of industries, but now proposals were being made for their withdrawal, which showed lack of permanency in policies.

It would be more appropriate to impose taxes on new industries rather than the old ones that had been relocated to the risk-prone areas due to the incentives, the cabinet was told.

It was also suggested that rather than increasing the taxes, these may be reduced for the tariff and settled areas and in that regard the FBR should apprise the cabinet of the percentage of edible oil, vegetable ghee and cooking oil being produced in Fata.

The cabinet deferred decision on the summary with the directive to the Revenue Division to re-examine its proposals in consultation with the stakeholders and come up with fresh suggestions at the time of announcement of the budget for inclusion in the Finance Bill.

 

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