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Revenue Board audit parameters for ghee inputs opposed

ISLAMABAD (February 08 2003) : The Pakistan Vanaspati Manufacturers Association (PVMA) has strongly opposed the Central Board of Revenue's (CBR) new audit parameters and costing of edible oils input adjustment, saying that the new procedure was based on exaggerated calculations to deny sales tax refund to industrialists.

The manufacturers said that refund of sales tax is calculated on the basis of actual GST payment at the local manufacturing stage whereas sales tax is paid at import stage, which was unjustified.

They demanded that parameters and costing of edible oil for input adjustment be made on factual basis.

Chairman of PVMA, Sheikh Abdul Razak, pointed out a number of irritants faced by the ghee/cooking oil industry in a 'charter of demands' at a seminar organised by Malaysian Palm Oil Promotion Council (MPOPC) in Karachi.

The 'charter of demands' included withdrawal of audit parameters worked out by the CBR, removal of anomaly in payment of sales tax and income tax between FATA/PATA and other areas' ghee/ cooking oil manufacturing units.

Razak noted that FATA/PATA ghee units were enjoying an edge of Rs 8 per kg at the cost of other units.

He added that anomaly in taxes between settled and FATA/PATA areas has resulted in closure of 15 units in settled area, and cautioned that the remaining would shut down if remedial measures were not taken forthwith to provide level playing field to all stakeholders.

He suggested that sales tax and withholding tax charged from the vegetable/cooking oil units located in tariff imposed areas may be absorbed in custom duty payable by the industries located in FATA/PATA, and quota of imported edible oils be fixed for FATA/PATA units on the basis of requirements of population of these areas.

The PVMA chairman also demanded removal of sub-section (3) and (8) of section 148 of the Income Tax Ordinance 2001, so as to treat the withholding tax charge at the import stage on edible oils as adjustable or as full assessment under section 143-B of Income Tax Ordinance, 1979.

The Chairman PVMA reminded that ghee/cooking oil industry contributes Rs 29 billion annually but despite the second larger contributor it was facing a number of problems.

He said that at present vegetable ghee/cooking oil units are required to pay 3 percent withholding tax at import stage which is treated as 'minimum' irrespective of the fact whether the concerned unit incurs loss.

In case the units earn profit excess amount calculated as income tax over and above the withholding tax is charged at the time of filing income tax return.

The PVMA demanded that the word 'minimum' should be eliminated from the concerned sub-section of the Income Tax Ordinance, 2002 to provide just treatment to the importers of edible oils and other raw materials by making it adjustable.

The association also wanted that exemption of payment of one percent warehousing surcharge.

It said that imposition of warehousing surcharge was totally unjustified.

The 'charter of demands' noted that solvent extraction units were taking undue advantage of exemption of sales tax and many of them sell their oil without paying sales tax and GST commonly to unregistered units.

It said that this amounts to pilferage of revenue to the tune of Rs 1.930 billion per annum, besides depriving registered units from a competitive market.

The PVMA noted that with levy of 20 percent sales tax on edible oil produced from imported commercial oilseeds could guarantee a level playing field to all the parties.

The PVMA wanted withdrawal of GST at manufacturing stage of vegetable ghee/cooking oil and reduction of sales tax at import stage from 20 percent to 15 percent.

The 'charter' said the CBR has recently fixed ITP value of imported plate at $ 400 against actual price of $ 240-270.

It claimed that high ITP value was fixed by the CBR just to protect Siddique Sons, a Karachi-based tin plate manufacturer, which, the charter added, was already enjoying total exemption of sale tax and there was no reason for providing such an outright protection to one unit at the cost of the entire industry.

It demanded that duty may be charged on the transacted declared value/ invoice price of imported tin plate verified by the PVMA.

The PVMA in its charter demanded acceptance of declared transacted value/invoice price of imported edible oils verified/authenticated by it.

CBR is assessing custom duty, sales tax on imported edible oils on the basis of higher Reuters prices prevailing on the day of contract, which is against GATT code of valuation under WTO agreement. It demanded that assessment of taxes should be made on the basis of declared transacted value/ invoice price verified by the association.

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