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Pakistan: Sales tax act: FBR urged to exclude cement from third schedule

19 May 2014   (0 Comments)
Posted by: Author: Zahid Baig
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Author: Zahid Baig (Business Recorder)

Cement industry has urged Federal Board of Revenue (FBR) to exclude cement from the third schedule sales tax act, which has resultantly increased the cost of the cement and is burdening the pocket of consumers. "The government can provide the needed respite to both the cement industry and the consumers by considering recommendations that were promulgated by the industry in its budget proposals for the year 2013 to 2014," said the sources at All Pakistan Cement Manufacturers Association (APCMA). 

They added that this initiative will resolve the mental dilemma that cement industry is facing at the moment, which is whether to overcharge the consumers located near cement plants or incur loss by supplying cement in hilly areas at cost. It will also prove beneficial in reducing the cement prices hence increasing consumption and government revenues eventually. 

They explained that it is in the larger interest to revive the old practice of selling cement through the wholesale mechanism and sales tax collection on ex-factory prices for different market areas as dynamics of every province and region is different in Pakistan. They further elaborated that the collection of sales tax on the basis of single MRP across the country is anomalous, which will ultimately force the manufacturers to restrict the sales only to nearby markets. 

This would mean stopping sales to the far flung areas where there are increased chances of parallel market getting established, which will impede FBR's revenue collection. It is worthy to mention here that cement industry has suggested that the cement manufacturers may be allowed to charge transportation as per hard-to-reach and easy-to-reach areas and keeping in view the vicinity of the production units ie if they are far from the market then they may be allowed to charge more and if situated near to these then the transportation may be lesser. 

Sources also added that in addition to exclusion from third schedule, cement industry has also urged FBR to initiate step-wise abolishment of FED, which amounts to Rs 400 per ton, in order to encourage cement off-take as it is not a luxury item and high taxation promotes evasion and negatively impacts consumption. In addition to this, cement industry is also subjected to 17 percent GST, imposed on MRP instead of ex-factory, which is comparatively very high from the global rates. The reduction of GST to 12.5 percent will encourage the registration of the unregistered taxpayers to avail the benefits of the input adjustments, said the sources. 

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