Tax on flour leaves stakeholders confused

Experts believe omission from Schedule VI might be a mistake

LAHORE: The imposition of general sales tax on flour has created a crisis in the milling industry and provincial government machineries, while tandoor owners have demanded that a flat rate of Rs20 be fixed on naans and Rs15 on roti.

Senior officials of the Punjab government contacted FBR officials on the matter and also continued their consultation with the tax experts. The FBR claimed there was no imposition of GST on flour. However, when it was pointed out there was no sales tax code for flour as an exempted commodity under Schedule VI, the revenue board officials were unable to explain.

Stakeholders of the flour milling industry, after completing legal consultation and confirming the imposition of GST, sought an emergency meeting of officials and important leaders of all the provinces in Lahore. The objective was to decide the next course of action.

Punjab Food Minister Samiullah Chaudhry remained active on the matter of sales tax on flour. He also informed the Punjab chief minister and has even directed his department’s secretary to contact FBR officials to correct technical mistakes, if there are any.

Flour mill owners all over the country are left scratching their heads and those with large production units are consulting tax experts. Pakistan Flour Mills Association group leader Asim Raza and central chairman Naeem Butt say the imposition of GST has spread extreme apprehension. They add that apart from mill owners consulting tax experts, the association itself is consulting them. After reviewing budget documents, the association has come to the conclusion that a levy has been imposed on flour, white flour and fine flour – whether by mistake or not.

They say the sales tax code for flour is 1101;46;0010 and it was included in Schedule VI of the Sales Tax Act in the previous fiscal year. He explains that this schedule included those commodities which were exempt from GST. However, in this fiscal year, the sales tax code was not included in Schedule VI nor Schedule VIII – the latter which reduces sales tax. This makes it clear that flour is not exempt from GST and this poses a severe problem for people. The association leaders stress that their peers will not accept this situation and that is the reason they have called all stakeholders on 12 July.

They continue that tax experts will also participate in the meeting and the group will announce their next plan of protest. Both leaders say they were informed before the budget about the possibility of 10% GST being imposed on flour. However, they were hoping that the government would refrain from such a levy to facilitate the poor.

They say that thousands of 79kg bags of flour are sold every day, while companies also use the same. As a result, prices of all things will increase. Lahore Tax Bar President Khurram Butt tries to clarify the situation. He says the sales tax code for white flour and fine flour was not included in both the schedules which either exempt or reduce levies.

He outlines that Schedule VI exempts commodities from GST, while Schedule VIII dictates that the entire 17% GST will not be imposed. However the latter schedule also highlights that any rate between 5 and 11 % can be imposed.

In reply to a query, Khurram Butt outlines there is the possibility of an unintentional mistake which can be rectified through an FBR notification. Speaking to Express, FBR Islamabad Chief Sales Tax Officer Amir Amin Bhatti says the board has not imposed GST on any kind of food, therefore, there is none on flour either. However, he was unable to clarify the situation when it came to the commodity’s sales tax code from Schedule VI and VIII.

Tandoor Association leader Lahore flour dealer Aftab Gill explains there are more than 10,000 tandoors in Lahore feeding thousands of workers and laborers. He has demanded that the rate of naan be fixed at Rs20 and roti at Rs15 otherwise his associates will be compelled to go on strike. “Nobody will be able to buy such expensive rotis,” he concludes.

Published in The Express Tribune, July 12^th, 2019.