PAKISTAN: FED on cement likely to be reduced by Rs250 per ton

The federal government is likely to cut Federal Excise Duty (FED) on cement up to Rs. 250 per ton in the upcoming budget for fiscal year 2012-2013.

Sources in cement sector told Business Recorder on Saturday that the federal government was likely to announce some relief package for cement industry in the wake of rising energy cost and lower dispatches.

In last year’s budget, it was announced by the government that FED on cement sector would be phased out in three years. A reduction of Rs. 200 per metric ton was proposed in the last fiscal year budget and equal reduction of the balance of Rs 500 per metric ton in the next two budgets.

As per the proposal, the federal government cut excise duty by Rs 200 per ton in the budget for 2011-2012 to facilitate the domestic cement industry and presently, cement manufacturers are paying FED at rate of Rs 500 per ton.

“We are expecting another cut of Rs 250 per ton in on account of FED in next budget 2012-2013, likely to announce on June 1, 2012,” said a representative of cement industry.

In this budget, the government is likely to reduce FED from Rs 500 per ton to Rs250 per ton, he said and added that it is also expected that government may not cut Rs 250 per ton and announce only Rs 200 per ton reduction as demanded by cement industry.

Currently, the cement sector is paying Rs 25 per bag excise duty and if Rs 200 was announced than it will be Rs 15 per bag. While in case of cut up to Rs 250 it will decline to Rs 12.5 per bag, they informed.

Sources said that the cement industry has also demanded the finance ministry to reduce the FED on cement by Rs 200 per tone from existing Rs 500 per tone. All Pakistan Cement Manufacturers Association (APCMA), in its budget proposals for 2012-13 submitted to the Federal Board of Revenue (FBR), has pointed out that the cement industry was paying FED of Rs 500 per tone, which comes around Rs 25 per bag.

However, it said that high rate taxation encourages evasion and negatively impact on consumption of cement, which is continue to decline in the domestic market.

They have also pointed out in the proposals that in last year’s budget speech, minister finance announced that the FED on cement would be phased out in three years. In light of the announcement they have demanded that the federal government should fulfill its commitment and reduce FED stepwise to zero as announced.

According to APCMA this move will support the efforts of the government to encourage construction activities in the country.