Budget proposal: FBR should reduce federal excise duty on cement, APCMA

cement feature

KARACHI: The All Pakistan Cement Manufacturers Association (APCMA), in its budget proposal, has suggested the Federal Board of Revenue (FBR) to reduce federal excise duty (FED) stepwise to zero as announced by the previous government to encourage cement off take since it is not a luxury item.


In the budget proposal sent to FBR Chairman Muhammad Ali Tabba, the APCMA chairman stated that the cement industry is subject to FED at the rate of 5% of retail price and general sales tax (GST) at the rate of 17% of maximum retail price. These taxes come to around Rs 100 per bag.


“This incidence of high taxation encourages evasion and negatively impacts consumption. The abolishment of excise duty not only eliminates tax evasion but also enhances cement consumption at reduced price,” he added.


He said that certain services are being taxed under independent provincial sales tax laws, which are in vogue in Sindh, Khyber Pakhtunkhwa and Punjab. Such services are still taxable under both the Federal Excise Act 2005 as well as under provincial sales tax laws, which are tantamount to double taxation.


“It is recommended that FED on all services rendered in Sindh, KP or Punjab may be abolished as it would eliminate double taxation and reduce cost of doing business,” he added.


Similarly, he said, before preferring appeal to the Office of Commissioner (Appeals) or Appellate Tribunal, a taxpayer is required to deposit the impugned duty demanded or penalty imposed in an appealable order. This mandatory compulsion is considered as a hindrance in the dispensation of justice.


The APCMA chief said the identical provisions in income tax and sales tax have already been repealed, therefore it is suggested that the same should also be removed from the excise law.


Moreover, the chairman said that Iranian cement is being flooded into border areas of Balochistan and is being sold at lower prices as compared to locally produced cement. “This phenomenon is detrimental for local manufacturers and in the longer run can challenge the survival of local industry. Additional regulatory duty should be immediately imposed on imports of Iranian cement and some prior approval mechanism from the government should be in place regarding quality of Iranian cement imported in Pakistan,”he requested.


He said this regulatory duty is a must to protect the local industry from the influx of Iranian cement. Also, recent increase in duty on import of coal from 1% to 6% has adversely hit the local manufacturers and has drastically increased cost of doing business,” the APCMA chairman added.


He requested that this latest increase in import duty on coal should be reduced to zero percent, as this would keep open the option of using coal as alternative source of energy. “The government had enacted the Gas Infrastructural Development Act of 2011, whereby the government charged a cess to all gas consumers except those of the domestic sector,” he added.


He said the 2011 Act was subsequently challenged and held to be ultra Vires to the constitution and the Supreme Court also declared that cess is a ‘fee’ not a ‘tax’ and that all amounts charged under the 2011 Act were to be refunded and/or adjusted in monthly bills within six months of the judgment i.e. August 22, 2014.


Subsequently, he added, the government promulgated the Gas Infrastructural Development Ordinance 2014 (2014 Ordinance), which via Section 8 of the 2014 Ordinance attempts to make all amounts collected under the 2011 Act to be validly collected. The 2014 Ordinance was originally to expire in January 2015 but was extended by the National Assembly till May 2015.


He said in May last year, the government passed the GIDC Act 2015. A Suit in the Sindh High Court (SHC) was filed, challenging the levy of GIDC as well as its retrospective effect. SHC granted a stay against charging of the GIDC under the 2015 Act on the first date of hearing.


“We request that the charge/levy GIDC should be abolished ab initio. It has increased the cost of doing business of the industrial sector. Further in current market scenario of declining fuel prices including liquefied natural gas in the international markets it will render domestic products uncompetitive in export markets,” said the APCMA chairman.


APCMA’s other proposals included duty drawback on exports of cement to Afghanistan, uniformity of tax rate for corporate sector, rate of minimum tax, initial allowance on plant and machinery, and building under section 23 of the income tax ordinance, 2001 (the ordinance), carry forward of minimum tax in case of tax losses.

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