PAKISTAN: Cement sector seeks relief

Cement manufacturers have asked the Federal Board of Revenue (FBR) to exclude cement from the “Third schedule” of Sales Tax act.

In case the said procedure continues, fixation of maximum retail price (MRP) must be allowed on the basis of two different zones in the upcoming budget of 2014-2015.

In a letter to the FBR chairman, All-Pakistan Cement Manufacturers Association said dynamics of every province and region are different, therefore, collection of sales tax on the basis of single MRP across the country is anomalous which would ultimately force manufacturers to restrict sales only to nearby markets.

It added that this would mean stopping sales to the far-flung areas where there are increased chances of parallel market getting established which would impede FBR’s revenue collection.

As an alternative, cement industry proposes a zone based maximum retail price as it will save consumers of nearby areas from paying excessive amount while protecting manufacturers from incurring losses on cement sales in remote areas.

In a letter, the association asked the FBR to introduce uniform tax rate for corporate sector besides some other measures in the upcoming budget for the year 2014-15.

Cement is one of the most taxed industries of the country and is currently subject to various taxes including Corporate Income Tax — 34pc of taxable income; Minimum tax: 1pc of Turnover (in case of losses; Withholding Tax — Multiple and cross withholding; FED — Rs400 per tonne; and Sales Tax — 17pc of the maximum retail price.

The association also proposed step wise abolishment of FED, which amounts to Rs400 per tonne to encourage cement off-take.

Cement industry is subjected to 17pc GST, imposed on MRP instead of ex-factory, which is comparatively very high from the global rates.

The reduction of GST to 12.5pc will encourage the registration of unregistered taxpayers to avail benefits of input adjustments.

The cement industry is experimenting with different options for reducing fuel cost by using alternative energy resources such as pet coke and shredded rubber tires to enhance its competitiveness in the global market. Therefore, the government should reduce the duty on alternative fuels to zero per cent as has been the case with coal, from current 5pc and 10pc of ad valorem.

APCMA has also suggested that the 50pc rate of initial allowance on plant and machinery be restored from the current 25pc which in turn would result in gearing up investment in BMR and capacity enhancement of existing industries.

It further proposed that withholding tax rate on import of raw material, spares, stores and capital goods by industrial undertaking for its own use be reduced from 5pc to 1pc.

APCMA proposed that 210 days should be set for filing duty drawback claims which were not accepted by the Customs Department pertaining to the period July 2005 to June 2011 due to unavailability of original Afghan Customs documents.