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OICCI opposes govt move to raise GST rate in mini-budget

By Our Correspondent
January 12, 2019

ISLAMABAD: While sternly opposing any move to raise GST rate by one percent from 17 to 18 percent in the mini budget, the Overseas Investors Chamber of Commerce and Industries (OICCI) has asked PTI led government to broaden the narrowed tax base instead of raising burden over existing taxpayers.

The OICCI also asked the government to maintain three tier taxation system for tobacco industry and reduce the difference between duty paid and non-duty paid cigarettes.

“We oppose any move to raise General Sales Tax (GST) rate from existing 17 to 18 percent through mini budget. We recommend the government to broaden the tax base for meeting its fiscal requirements instead of burdening more the existing taxpayers,” the OICCI sent out written recommendations to the government in case of presenting mini budget before the Parliament within this ongoing month. As the oldest and largest investment chamber, the OICCI draws on a diverse membership both in terms of sector and geography with the current 189 members representing 35 different countries and 14 different sectors of trade and industry.

On the Regulatory Duty (RD), the OICCI recommended that it should be slapped only on finished products instead of raw materials because it was going escalate cost of products manifold and making the country uncompetitive in terms of boosting exports.

The broadening of tax base could provide permanent solutions to existing fiscal woes faced by the country where only 1.4 million were return filers out of total 206 million population of the country.

Duty not Paid (DNP) Cigarettes: The OICCI argued that the government generates close to Rs100 billion annual revenue from the tobacco industry of which the two multinational companies with a 66% market share contribute 98%, whereas the other business entities having 34% market share contribute just 2%, clearly highlighting the evasion in government revenue, of close to Rs45 billion annually.

Therefore effective reforms are needed to increase collection from tobacco industry. In view of the above context, the OICCI recommended broadening of tax base and revenue from the tobacco sector are three-fold: a) Create market non-feasibility for selling DNP products: Reducing the price differential between Duty Paid & DNP sectors by maintaining the current three tier excise structure and rates, while ensuring compliance to minimum price laws.

b) Administrative actions to curb manufacturing and selling of illicit cigarettes: Administrative action by the government, including raids and seizures, need to be conducted with strict penalties on those found in non-compliance to the law.

c) Fiscal Markings: Introduce a monitoring system through pack identifiers: Fiscal markings, administered and enforced correctly and selected through a transparent process, will result in quick identification of DNP cigarettes arresting the increase in DNP sector and increasing government revenues, the OICCI concluded.