Government revises sales tax on cottonseeds

KARACHI: Government has revised sales tax on cottonseeds to six rupees/40-kilogramme – an attempt apparently made to encourage ginners to obtain sales tax registration.
A notification by the Federal Board of Revenue (FBR) on Friday fixed sales tax on cottonseeds supplied by ginners to registered or unregistered firms for oil extraction/expelling.
The FBR asked all the ginners to get sales tax registration.
The new statutory regulatory order (SRO) 188(I)/2015 by the FBR modified the previous SRO 213(I)/2013 under which the sales tax at the rate of two percent of the value was levied on supplies of cottonseed.
Agriculture experts said the new rule will be beneficial for the growers.
“Earlier, a sales tax liability on 40-kg price of cottonseed (Rs2,500) came around at Rs50, while it will now be Rs6,” explained an expert.
According to the USDA world markets and trade report, Pakistan’s cottonseed production is projected at 4,500 metric tons in 14/15 marketing year (Aug-July).
Under the new FBR rules, cotton ginners are also required to collect and deposit the tax and mention the same in their monthly sales tax returns.
Through the latest SRO, the FBR amended Sales Tax Special Procedure Rules, 2007 and introduced special procedure for sales tax on cottonseed oil expelled by oil expelling mills and composite units (ginning and expelling).
According to the new SRO, oil expelling units, using the cottonseeds on which sales tax has already been deducted, would be exempted from the payment of sales tax on the supplies of oil cake produced from such cottonseed.
However, ginners are required to submit a certificate to the commissioner of Inland Revenue by 15th of every month for the quantity of cottonseed supplied to growers for sowing purpose.
The FBR said that ginning units should inform the commissioner of Inland Revenue of their respective jurisdiction about the commencement and closure of ginning activity within three days.
Cotton ginners are also required to provide detailed report to tax departments about the cessation of ginning activity, which should include statement of production, supply of ginned cotton, cottonseed, cottonseed oil, oil cake and oil dirt.
“Failing in doing so, cotton ginner would be liable to penal action, including a fine of Rs5,000 or three percent of the amount of tax involved, whichever is higher,” said the order.
Under the final statement, ginners are required to provide details, including phutti purchased, cotton lint, oil cake, oil dirt and cottonseed oil produced, cottonseed produced and supplied and sales tax paid.
The FBR said the exemption from payment of sales tax on oil cake supplies would come into force with immediate effect.
However, the remaining part of amendments would be deemed to have effect from July 1, 2014.