Cotton Seed Cake: ECC likely to turn down a tax exemption proposal

Atif Abbas

Islamabad: Amid commitment with International Monetary Fund (IMF), the government is reluctant to exempt cotton seed cake from 5 per cent sales tax that is likely to increase import of edible oil.

The government had made commitment with IMF that it would not give any preferential tax treatment or exemption. Now, finance division has proposed economic coordination committee (ECC) that cotton seed cake could be given tax exemption in upcoming budget through finance bill.

Ministry of Food and National Security had moved a summary to Economic coordination committee (ECC) proposing to exempt 5 per cent sales tax on cotton seek cake.

ECC had directed Finance division in its meeting held on December 23, 2019 to examine the issue holistically in consultation with Federal Board of Revenue (FBR) and food ministry and submit a report for consideration.

Following this, a meeting was held on December 31 in finance division to examine the issue with food ministry and FBR.

Secretary food ministry had explained that cotton seed cake contributes 60-70 per cent in local seed oil production. Due to the imposition of sale tax, cotton seed cake become more expensive animal feed resulting into cotton seed as feed. This trend had resulted in native impact on local seed oil production that is likely to result in increase of edible oil or oil seeds.

It was agreed that 5 per cent sales tax on local seed cake does not have major revenue impact that is around Rs 5 billion per annum and therefore, its exemption would not result in affecting the revenue target. However, the representative of FBR explained that it was not possible to grant exemption through SROs. Furthermore, under the reform program backed by International Monetary Fund (IMF), the government is committed to avoid issuing new preferential tax treatments or exemptions.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular

To Top