960405

Move to bring in Rs 900m

Sales Tax on tea may be

shifted to packaging

stage in new budget

RECORDER REPORT

KARACHI: The government is likely to shift sales tax from imports to packaging stage on tea in the upcoming budget for 1996-97, which will increase the revenue collection by nearly Rs 900 million provided the consumption remains the same, it is reliably learnt.

Tea traders pointed out that the average imports of tea into the country are around 120 million kgs.

After the impositions of the regulatory duty of 10 percent, the total quantum of government levies on tea comes to 101 percent of net cost which ranges between Rs 50 to Rs 57 per kg.

Traders in the loose tea business sell it in the range of Rs 115 to Rs 125 per kg retail, whereas the multinationals are selling their product in the range of Rs 156 to Rs 160 per kg.

Chairman, Pakistan Commodity Traders Association (formerly Karachi Kiryana Merchant Group) Raees Ashraf Tar Mohammad said that last year, his association had submitted a similar proposal to the government to levy sales tax on packaging stage instead of at the import stage. He said although the share of multinationals is nearly 80 percent of the total tea trade, on occasions, in order to meet the consumers requirements, this share rises by another five to 10 percent.

At present, total tea imports stand at Rs 5.5 billion and sales tax paid is to the tune of Rs 1.5 billion. Branded tea makers pay Rs 1.2 billion of this tax on imports of nearly 100 million kgs. Small tea traders pay around Rs 300 million in Sales Tax on imports of 20 million kgs.

If sales tax is shifted from import stage to packaged stage, the government revenue will increase by almost 60 percent, bringing in a net Rs 900 million to state coffers at the same consumption level.

Raees Ashraf said that the government exchequer would be enriched by another Rs 500 to Rs 700 million in the process because more tea traders will jump into the field. At present, he explained, genuine importers and multinationals are under the burden of 101 percent government levies which includes 15 percent sales tax, whereas the smugglers only have to pay 55 percent. If the government shifts taxation to the packaging stage, the move will relieve the genuine importer of a 15 percent tax burden.

Furthermore, since the total impact of sales tax on any product including tea is 22 to 24 percent if it is moved to packaging stage move would bring, the genuine importers at par with the unscrupulous trade, and thus frustrate the smuggling regime.