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June 25, 2019

Adjustable tax on tobacco growers to be brought down


June 25, 2019

ISLAMABAD: With clear-cut division and increasing tension between agriculturist and business tycoons enjoying backing of parliamentarians, the government on Monday decided to bring down adjustable tax on tobacco growers from Rs300 per kg to Rs10 per kg and announcement to this effect will be made from next fiscal year.

This incentive will provide relief to tobacco growers mainly belonging to Khyber Pakhtunkhwa. An interesting situation emerged during the proceedings of Special National Assembly Standing Committee on Agriculture constituted by NA Speaker Asad Qaiser, which met here at Parliament House on Monday, where MNAs belonging to agriculture background demanded of the government to re-impose 10 percent duty on import of cotton after July 1, 2019. It was also pointed out by MNA belonging to cotton belt that the area of cotton sowing decreased by 0.7 million hectares because the growers were shifting from cotton to sugarcane crop because of better returns.

They further stated that the customs duty on cotton import was proposed to withdraw 3 percent duty through Finance Bill 2019-20. Even one treasury member Riaz Fatyana announced in presence of NA Speaker to boycott the meeting in protest and stated that out of 27 recommendations the government did not make 25 recommendations part of the budget and partially accepted remaining 2 recommendations. Riaz Fatyana was requested by by NA Speaker and Minister for Aviation Ghulam Sarwar Khan after which he sat down on his seat. But after some time, he left the proceedings of the committee without any announcement.

On demand of bringing changes on import of cotton, Prime Minister’s Adviser on Commerce Abdul Razak Dawood said that there should be no restriction on import and export of cotton. He also opposed move to fix minimum support price of cotton. He opposed any move for changing duty structure of textile sector and argued that with abolishing of zero rating regime, the textile sector would be facing acute liquidity crunch. Now the government, he said, promised to clear refunds from July 2019 as earlier it could not be done and stuck up amount stood at Rs300 billion.

“We have decided to reverse to taxation of Rs10 from existing Rs300 per kg from Green Leaf Threshing Plants (GLT) and it will not affect our tax collection because it was adjustable tax imposed for the purpose of documentation. We will increase tax collection from tobacco up to Rs135-140 billion in the next fiscal with increased rates against Rs115 billion in outgoing financial year,” Minister of State for Revenues Hammad Azhar stated before the Special National Assembly Committee on agriculture sector.

He told journalists after the meeting that the government collected Rs140 million tax from tobacco growers in outgoing fiscal year and it was decided to revise downward to Rs10 per kg for using it for the purpose of documentation only.

Atif Khan, provincial minister from KP who participated in the special committee meeting alleged that the multinational companies of tobacco were quite influential as they used certain newspapers and reporters to make efforts to influence the policy makers through publishing news reports and made it clear that they would take decision under any pressures.

Minister of State Hammad Azhar said that the days had gone when powerful lobbies were used to exert pressures to get decision of their favour. He said that the government rejected the demand of multinational companies and implemented WHO recommendation to jack up tax rate on tobacco where the government increased tax of Rs8 on tier two packet and Rs14 on tier one cigarettes packets.

PTI MNA Fakhar Imam and coalition partner of ruling coalition Fehmida Mirza who is Minister for Inter Provincial Coordination spoke on the occasion and said that the growers got prices less than international market in last ten years so the government chose path to dole out benefits to growers belonging to USA, Central Asian Republics and India.

Adviser to PM on Commerce Abdul Razak Dawood said that the sugar prices were kept artificially high and mentioned that the real problem was inability to enhance productivity.

He said that the contaminated cotton could not be used for value addition. Minister of state for revenues said that the government jacked up tax rate on sugar from 11 to 17 percent under which the price of sweetener should have gone up by Rs3.26 per kg in the domestic market. He made it clear that the federal government in coordination with the provinces would launch crackdown against hoarders of sugar after the approval of budget as there was no justification to fleece the consumers. He said that the prices of ghee/cooking oil would not increase because of taxation measures. The flour (atta) prices should not increase and admitted that the corn flakes of renowned brands brought into tax net.

Minister for Aviation Ghulam Sarwar Khan said that there was need to increase allocation for research of agriculture sector adding that without research on seeds the productivity could not be increased.

On poultry issues, the representatives of this sector argued that the processed foods was brought into standard rate of 17 percent GST that would result into price surge of Rs104 to Rs115 per kg impact. However, the minister of state for revenues said that the tax rate was increased on processed foods such as nuggets as it is being used by higher income brackets.

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