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December 10, 2010

Bread-makers demand exemption from RGST


December 10, 2010

LAHORE: Bread manufacturers have appealed to the government to keep bread exempted from reformed general sales tax (RGST) as it is an essential food item exempted from consumption tax all over the world.
They warned that 125 documented, automated bread manufacturing plants in the country employing around 30,000 workers would close down if RGST was imposed on bread, the daily breakfast food in most of the urban households.
“It will put at risk about Rs10 billion investments of small and medium entrepreneurs,” said Haroon Chaudhry, the chief executive of Bunny’s Limited.
“RGST is a nightmare for those documented sectors where non-documented competitors are equally strong as in the case of bread where the end product looks the same and doesn’t reveal the unhygienic processes adopted by small roadside bakeries.”
He said that under the current inflationary situation people went for the cheaper product without caring about how it was prepared.
He said an automatic bread plant was established at a cost of Rs150 million to Rs1 billion depending on its size. “The breads manufactured by these plants comply with the best global health and hygiene standards, which cannot be guaranteed by the non-documented bread-makers who would capture the entire bread market if RGST was imposed on the documented manufacturers.”
Dawn Bread Group Managing Director Fida Hussain said that of the 1.5 million breads produced daily in the country half were produced on automatic plants under hygienic conditions and the remaining were manufactured by small bakeries.
He said the shelf life of the bread produced at automatic plants is three days because they use bread life enhancers while the bread produced in ordinary bakeries has a shelf life of only one day.
He said the branded bread manufacturers display the expiry date and ingredients on the packing, but bakeries fail to do so.
He said bread production accounts for 60-80 percent of the total

production of automated plants. Other items such as plain cakes, biscuits and cake rusk were already subjected to sales tax. “It is ironical that a plain cake of Rs60 produced at an automatic plant and consumed by the poor is subjected to sales tax, but expensive cakes produced by bakeries, but consumed by the affluent class, are exempt from sales tax.”
Ramna Food Products Director Azam Chaudhry said that instead of targeting the already documented sector the government should bring in the non-documented bakeries into the tax net.
He said all biscuits, cakes produced by the non-documented sector should be subjected to sales tax to provide level-playing field to all manufacturers.
Bread, he added, should remain exempted from RGST as it is as important as pulses, vegetable, beef and mutton.

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