The government has decided to approve 10 percent tax relief on the import of edible oil for the next two months (April-May 2022) with the objective to mitigate the impact of high international palm oil prices in the domestic market.

A meeting on the issue of palm oil prices in the international market and their impact on the local market presided over by Finance Minister Shaukat Tarin was informed on Friday, thtat the government has taken the decision to deal with the expected shortfall in the month of Ramzan due to hike in prices.

The Federal Board of Revenue (FBR) is finalising working in this regard.

When contacted, industry sources said that so far, it is not clear that which tax would be reduced or abolished for granting overall 10 percent tax relief on import of edible oil.

Whether it is a sales tax, import duty or sales tax adjustment under section 8B (1) of Sales Tax Act, 1990.

The industry has no clue that the said 10 percent tax relief would be provided in which form of rationalisation of taxes.

The meeting was informed by the Ministry of Industries and Production that monthly average retail prices of Refined, Bleached and Dried (RBD) palm oil are highly volatile and have increased almost twice compared to last year prices.

The meeting was further informed that currently, in the month of January, there was significant increase in its prices approximating $1,351 per ton.

The meeting noted that the tax relief measure on import of edible oil is being undertaken for short term to ensure smooth supply of edible oil to the consumers as 90 percent of nation’s annual demand for ghee/cooking oil is dependent on imported inputs.

The government has also decided to provide Rs135 per kg subsidy on ghee at Utility Stores Corporation during the month of Ramzan under Prime Minister Ramazan Package and Rs20 per kg on ghee and allocated Rs4.050 billion on sale of 30,000 metric ton ghee and Rs300 million for sale of Rs15,000 metric ton in order to lessen the impact of inflation on the general populace.

The meeting was attended by Federal Minister for Industries and Production Makhdoom Khusro Bakhtyar, Secretary Industries and Production, Chairman Federal Board of Revenue (FBR) and other senior officials attended the meeting.

A document available with Business Recorder revealed that the FBR has received industry’s proposal on rationalization of taxes.

The industry informed the FBR that in the wake of highly volatile international commodity market and un-satisfactory/depleting domestic stock level of edible oil, looming shortage of ghee/cooking oil in the coming months cannot be ruled out. Therefore, the industry resolved as under to counter the prevailing un-sustainable circumstances with respect to depleting domestic edible oil stocks.

The applicability of Section 8 B (1) of Sales Tax Act 1990 for the purpose of sales tax input adjustment up to 90% to be suspended and allow 100% Sales Tax Input adjustment till June 30, 2022, in order to improve the cash flow situation of importers cum manufacturers of edible oil, since the prices have surged to around US$ 1,750 per metric tons (PMT) cost and freight (C&F).

To mitigate the impact of duties and sales tax on the current exorbitantly high prices of edible oils, it is proposed that Import Tariff Price (ITP) of edible oil products, ie, Crude Palm Oil (CPO), RBD Palm Oil, RBD Palm Olein, Sunflower Oil and Crude Degummed Soybean Oil(CDSO) to be set at an average price prevailed during July 1, 2021 till January 31, 2022for the purpose of levying duties/sales tax/other taxes at import stage. This will help in reducing the incidence of duties/sales tax and will enable the industry to improve their cash flow which is imperative in the current market scenario.

The mutually calculated and agreed ITP or actual international market price (whichever is lower at the time of import for the purpose of calculating duty/taxes) to come into force immediately and will be valid till June 30, 2022.

The government will review the import volume by the Fata/Pata Units as there has been huge distortion between their import volume and consumption pattern. Pakistan per capita consumption is 20kgs and the import volume of Fata/Pata has to be linked with the population official figures available in the Pakistan Economic Survey.

It was also proposed that all import levies/sales tax for the Fata/Pata Units should also be collected at import stage and refund to be made after getting their Consumption Certificate duly scrutinized and verified.

To promote the culture of Ease of Doing Business and building confidence amongst the importers/manufacturers/refiners, coercive attitude/actions may be done away with and the Competition Commission of Pakistan (CCP) and the FBR may be directed to avoid issuing coercive notices.

The FBR has been informed about the measures to be taken to curb the influx of Iranian origin cooking oil smuggled into Pakistan which is not only depriving the necessary duty to the government but also compromising the level-playing field.

The story was originally published in Business Recorder on March 26, 2022.