The manufacturers of ghee and cooking oil have stopped clearance of their imported consignments of edible oil from the Customs Collectorates on the anticipation of 10 percent tax relief promised by the government.

Sources in the Customs Department confirmed to Business Recorder that the importers of the edible oil are not clearing their imported consignments since last 10-12 days from ports.

On the other hand, the industry is totally confused that what tax would be abolished. Abdul Waheed, former chairman Pakistan Vanaspati Manufactures Association (PVMA) informed that the government must immediately issue the relevant statutory regulatory order (SRO) to end confusion and avoid shortage of ghee and cooking oil during Ramazan.

During a meeting on March 25, on the issue of palm oil prices, 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.

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.

Industry sources informed that there is an uncertainty in the market.

There are strong apprehensions that there might be shortage of ghee and cooking oil during coming Ramazan. 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 industry informed the FBR that in the wake of highly volatile international commodity market and unsatisfactory/ 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 to counter the prevailing unsustainable circumstances with respect to depleting domestic edible oil stocks. 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, i.e., 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, 2022 for 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 story was originally published in Business Recorder on March 30, 2022.