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Cement makers seek zero-rating for ease of doing business

March 29, 2022

LAHORE: Pakistan Cement Manufacturers Association (PCMA) have proposed zero-rating of various duties and taxes for ease of doing business, reducing the cost of production and increasing investment in the sector.

PCMA Chairman Muhammad Ali Tabba has requested the federal government to bring the federal excise duty (FED) down to “zero” in a stepwise manner to encourage cement off take and support housing and infrastructure development.

Currently, the cement industry is subject to FED at Rs1,500/tonne and 17 per cent GST of maximum retail price. These taxes for the year 2020-21 reach to around Rs170/bag. The PCMA believed that abolishing of excise duty would not only eliminate tax evasion but also enhance cement consumption at reduced prices.

Further, the PCMA proposed zero per cent customs duty on coal and pet coke, which the industry uses as fuel/raw material for various manufacturing concerns. For now, the customs duty and ACD was five per cent. Similarly, it asked for zero per cent customs duty on import of all plant and machinery and capital goods to cut down the capital cost for capacity enhancement.

The PCMA suggested complete ban on import of cement from Iran to safeguard the domestic industry against smuggling. Further, it suggested including all types of cement and clinker in the list of locally manufactured goods with necessary amendments in customs general order. This, it said would not only discourage import of such goods and improve capacity utilisation of the industry, but also support the government in terms of additional revenue generation from local production.

The PCMA asked the government to amend SRO250 dated February 26, 2019 related with the track and trace system. According to the SRO, the fee for the operation of the SRO would be recovered by the licensee (private firms) from the companies and industries covered under it.

The SRO should be amended suitably to ensure that all the costs of track and trace system including CAPEX were not be borne by the manufacturers of goods. Or else, it suggested allowing hundred percent tax credit to the manufacturer on costs incurred. The cement industry believed that it was against the main objective of the current government to provide ease of doing business for the manufacturing industries.

PCMA proposed omission of Section 8A of withholding sales tax which was a settled preposition that no one could be condemned for the act of another. “It is recommended to delete the clause 8(1)(j) or to be amended to allow input tax to be claimed by registered person as it is allowed to claim input tax on goods listed under Eighth Schedule to the Sales Tax Act, 1990,” the proposal said.

Further, the input tax on building materials should be restored and discretionary authority vested with the department be withdrawn and only those items be disallowed which were specifically stated under the law. The input tax on vehicles other than those for administrative use should be allowed as prime movers, trailers and dump trucks were an essential part of cement supply chain.

The PCMA suggested that Section 21(3) should be rationalised and input tax should not be disallowed if: buyer holds valid tax invoice, supplier’s name was appearing in the active taxpayers’ list at the time when purchases were made; and payments were made through banking channel in compliance with Section 73 of the STA.

It was suggested that the standard sales tax rate be reduced to 15 per cent and gradually brought down to 10 per cent by reducing two per cent each year at least for the mega government projects like sales to SMEs, sales for dams, five million housing scheme and CPEC like projects.

The cement industry believed that of 17 percent tax rate was very high considering the rate of sales tax in other developing countries like Malaysia was in the range of 5-10 per cent, whereas in Bangladesh it was 15 per cent.

In order to provide level playing field to local investment, if not 100 per cent, at least 10 per cent credit on investment in plant and machinery, which was previously available under section 65B, should be restored.

Rate of advance tax of five per cent on consumption of electricity for industrial consumers was on high side and it should be reduced to zero percent for filers. Further, conducting of an audit only once in three years should be kept intact, at least for listed companies and large tax payers.

It also proposed that an amendment be made in the Workers Welfare Fund and Workers Profit Participation Fund laws to allow taxpayers retaining the amount of these levies rather than paying the same into the government treasury. The proper utilisation of these funds should be supported with transparent reporting and audit by independent external auditors, the PCMA proposed.

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