LAHORE  - The Federal Board of Revenue instead of keeping taxation simple and easy has come up with policies that hurt the consumers, manufacturers and ultimately the national exchequer itself.
Through Finance Act 2013, cement has been placed in 3rd Schedule to the Sales Tax Act, 1990 whereby sales tax is chargeable at 17% of the retail price which along with amount of sales tax is required to be prominently printed on each bag. Under this regime the manufacturers will have to factor in the transport cost, which is very high for this commodity.
According to a source in industry, the cement transportation cost for every destination would be different. It would be lower for short distances but higher for cement dispatched to dealers located away or in hilly areas.
“Since a manufacturer can fix one retail price for charging sales tax it would be a dilemma because if they fix the price on the basis of transport cost of the longest distance the consumers at short distances will pay a very high sales tax and if the calculation is based on short distance deliveries then the manufacturer will suffer,” he added.
“Before introduction of this amendment we were selling cement through wholesale mechanism and collected sales tax on ex-factory prices fixed by the company for different market areas. All dealers were responsible for the freight costs and price was decided by market forces in each area,” he said while adding that the wholesalers were compensated through payment of commission.”
But the fixation of single market price for across the country is likely to turn retention price negative due to heavy transportation costs, forcing manufacturers to abandon the far and hilly areas and concentrate nearby localities where the transportation cost gets even higher.