Govt to end 5% sales tax on cottonseed
Decision taken to increase production of edible oil in country
PHOTO: EXPRESS
ISLAMABAD:
The federal government has decided to exempt cottonseed from 5% sales tax in line with a recommendation given by the Ministry of National Food Security and Research.
The matter is subject to final approval by the Economic Coordination Committee (ECC) of the cabinet.
The Ministry of National Food Security has prepared a summary for presentation in an ECC meeting and its copy has also been forwarded to the Ministry of Industries, Ministry of Finance and Federal Board of Revenue (FBR).
According to a copy of the summary available with The Express Tribune, about 1,200 ginning factories are currently in the business of extracting lint from cottonseed, which is also utilised by 6,000 edible oil factories.
Govt launches Rs309.7b agricultural programme
Pakistan’s annual cotton produce yields about 4 million tons of cottonseed, from which about 400,000 tons of edible oil is produced, which constitutes about 60-70% of the total edible oil produced in the country.
The government had imposed a 5% sales tax on cottonseed. On the other hand, cottonseed cake, used as livestock feed, is exempt from the sales tax. According to Annexure-I of the Sales Tax Act 1990, the feed for cattle including sunflower seeds and canola is exempt from sales tax. Owing to the tax exemption, cattle farmers and other growers in Pakistan are increasingly using cottonseed for livestock feed, instead of utilising the seed in edible oil production.
Consequently, the production of edible oil is going down. This poses a risk for the country because it will be required to import edible oil in huge quantities in the near future, which will put pressure on the country’s foreign exchange reserves.
Keeping the ongoing developments in view, the Ministry of National Food Security has proposed exemption from a 5% sales tax on cottonseed.
Agriculture has potential to give boost to economy
Although the FBR maintains that the decision on the exemption would be taken by the ECC, it has itself introduced a new sales tax collection system, according to which cotton ginners are being taxed at Rs7-8 per maund. The FBR has also made it mandatory for all the ginners to get registered for sales tax payment.
In a notification issued earlier this year, the FBR laid down a special procedure for sales tax collection from the composite ginning units involved in the extraction of edible oil from cottonseed.
According to the notification, all ginning units, whether registered and unregistered with the FBR, were liable to pay Rs7 per maund in sales tax on cottonseed until June 30, 2019 while from July 1, 2019, they would be required to pay Rs8 per maund in sales tax.
Published in The Express Tribune, November 20th, 2019.
The federal government has decided to exempt cottonseed from 5% sales tax in line with a recommendation given by the Ministry of National Food Security and Research.
The matter is subject to final approval by the Economic Coordination Committee (ECC) of the cabinet.
The Ministry of National Food Security has prepared a summary for presentation in an ECC meeting and its copy has also been forwarded to the Ministry of Industries, Ministry of Finance and Federal Board of Revenue (FBR).
According to a copy of the summary available with The Express Tribune, about 1,200 ginning factories are currently in the business of extracting lint from cottonseed, which is also utilised by 6,000 edible oil factories.
Govt launches Rs309.7b agricultural programme
Pakistan’s annual cotton produce yields about 4 million tons of cottonseed, from which about 400,000 tons of edible oil is produced, which constitutes about 60-70% of the total edible oil produced in the country.
The government had imposed a 5% sales tax on cottonseed. On the other hand, cottonseed cake, used as livestock feed, is exempt from the sales tax. According to Annexure-I of the Sales Tax Act 1990, the feed for cattle including sunflower seeds and canola is exempt from sales tax. Owing to the tax exemption, cattle farmers and other growers in Pakistan are increasingly using cottonseed for livestock feed, instead of utilising the seed in edible oil production.
Consequently, the production of edible oil is going down. This poses a risk for the country because it will be required to import edible oil in huge quantities in the near future, which will put pressure on the country’s foreign exchange reserves.
Keeping the ongoing developments in view, the Ministry of National Food Security has proposed exemption from a 5% sales tax on cottonseed.
Agriculture has potential to give boost to economy
Although the FBR maintains that the decision on the exemption would be taken by the ECC, it has itself introduced a new sales tax collection system, according to which cotton ginners are being taxed at Rs7-8 per maund. The FBR has also made it mandatory for all the ginners to get registered for sales tax payment.
In a notification issued earlier this year, the FBR laid down a special procedure for sales tax collection from the composite ginning units involved in the extraction of edible oil from cottonseed.
According to the notification, all ginning units, whether registered and unregistered with the FBR, were liable to pay Rs7 per maund in sales tax on cottonseed until June 30, 2019 while from July 1, 2019, they would be required to pay Rs8 per maund in sales tax.
Published in The Express Tribune, November 20th, 2019.