GST exemption on above 20kg flour bag withdrawn

Tandoor owners are likely to pass on tax burden to the consumers by increasing the price of roti and naan

LAHORE: The Federal Board of Revenue (FBR) has withdrawn General Sales Tax (GST) exemption on flour bags weighing more than 20 kilograms as a result of which a GST of 17 percent will now be imposed on the 80kg flour bag sold to tandoors reflecting an increase of Rs600 per bag.

The tandoor owners are likely to pass on the tax burden to the consumers by increasing the price of roti and naan.

As per FBR notification, GST exemption on fine flour and maida has also been withdrawn after which they have been classified in the list of products under schedule 17. Consequently, the price of maida and fine flour is also expected to rise by 10 per cent.

Flour bags weighing up to 20 kilograms will remain exempted from GST. However, the citizens of Khyber Pakhtunkhwa will see a remarkable increase after imposition of 17 percent GST in flour prices, since they are generally supplied flour in 40kg sacks.

Taking notice of the probable hike in flour prices, Central Chairman of Pakistan Flour Mills Association (PFMA) Naeem Butt has called up an emergency meeting of mill owners from all four provinces in Lahore.

According to president of Lahore Tax Bar Association Khurram Butt, FBR has already imposed the 17 percent GST on flour bags and sacks weighing above 20kg.

"The officials of FBR, particularly member sales tax, should comprehensively review the measure and brief the industry stakeholders in this regard," he said.

Until the end of last fiscal year, flour, maida and fine atta have always remained under the list of products exempted from GST under schedule 6 of Sales Tax Act.

However, the current government in its fiscal budget 2019-20 has shifted maida and fine flour from schedule 6 to schedule 17 of the Sales Tax Act after which a 10 per cent GST will be imposed on them.

In Pakistan, especially in Punjab, tandoors are supplied with 79kg flour bags. With the 17 per cent GST, the price of these bags, currently at Rs3,150 may see a hike in excess of Rs600.

In KPK, people consume flour in high amounts which is why flour bags supplied for household consumption come in 40kg packing. After GST imposition, the price of these bags is expected to rise in excess of Rs300.

The price of 84kg sack of maida and fine flour currently stands at Rs3,900 and after the imposition of 10 per cent GST on these products, their prices may see a surge of Rs400.

Talking to The Express Tribune, PFMA Central Chairman Naeem Butt maintained that the governments in the past had kept flour, maida and fine atta under the list of GST-exempted products in order to ensure relief for the common man, but the current government's measure to impose GST on flour bags weighing above 20kg amounts to economic exploitation as majority of the people who buy roti from tandoors comprise daily wagers and labourers.

"If GST is imposed on commercially supplied flour, the tandoor owners will also be forced to pass on the price increase to their consumers," he said, adding that "KPK still largely has a joint family system where flour is procured in large bags. The common man is also likely to come under the tyrannical radar of the general sales tax. Keeping the alarming bells in view, we have called mill owners from all four provinces to show up at an emergency meeting in Lahore to discuss the strategy for future".

He said that the tax experts have confirmed the association that the government has imposed GST on flour bags weighing above 20kg.

Meanwhile, Lahore Tax Bar Association president Khurram Butt has also confirmed the development and said that the budget for the new fiscal year clarifies that tax exemption on maida and fine flour has been withdrawn after which 10 per cent tax will be levied on these products, while exemption on flour bags up to 20kg remains intact.

"However, flour bags in excess of 20kg weight will see imposition of 17 percent GST. The officials of FBR must present their clarification in this regard to avoid market instability," he said.