LAHORE - The cooking oil and ghee industry, in its budget proposals for 2013-14, has recommended the new structure of income tax and federal excise duty (FED) to the Federal Board of Revenue, urging the authorities to abolish Section 65D of Income Tax Ordinance, 2001 with a view to avoid revenue loss to existing ghee manufactures.  The Section 65D of Income Tax Ordinance, 2001 was introduced to attract new investment with the facility of tax credit to new industrial undertakings. The section was specifically designed to attract investment for the establishment of new units.
However, industry said that manufacturers of vegetable ghee and cooking oil are presently importing oil of around 2 million metric tons annually out of which 95 per cent consists of palm oil and its sub-products. After the in-corporation of Section 65 D in Income Tax Ordinance, 2001 through Finance Act, 2011 and few additions through Finance Act, 2012 all those industrial under-takings established between July 1, 2011 and June 30, 2016 shall be given a tax credit equal to one hundred per cent of tax payable under any of the provisions of ordinance including sub-section (8) of section 148 to which import of edible oil falls at the rate of 5 percent in minimum mode.
At the prevailing international market price of palm oil products the charge-able income tax (WHT at import stage) on landed cost per metric ton is Rs 5,480 or nearly Rs5.5 per kilogram. The advantage granted to new set-ups by virtue of said section would push existing state of the art units out of competition hence closure or collapse and rise to bad debts.
Industry said that at present cumulative installed capacity of refining and manufacturing sector is over 5 million tons against requirement of around 3 million tons only per annum, consequently most of the units are struggling next to verge of closure. Under given circumstances there exist no room for installation of new units and shall be a mere wastage of national resources and hard earned foreign exchange being consumed for import of plant and machinery, they said.
They said that since Fata enjoys immunity against levy of taxes under the Sales Tax Act, 1990 and Income Tax Ordinance, 2001, therefore, earlier in 2004-05 the government levied Federal Excise Duty. The rationale behind imposition of FED on edible oil was to provide a level playing field to manufacturers located in settled areas. As of now, the manufacturing units of FATA are enjoying exemption of 5 percent WHT on import of edible oils in addition to total exemption of payment of sales tax on inputs like tin-plate, chemical, electricity, natural gas etc.