LAHORE: The federal government is likely to withdraw all the taxes on milk in the forthcoming budget and impose Value Added Tax (VAT) on it, official sources said on Tuesday.
The Federal Board of Revenue (FBR) has been working to end tax regime on milk, dairy products and livestock to help enhance milk and meat productivity, sources said requesting not to be named as they were not authorised to speak with media.
All the taxes would be withdrawn to bring down the prices and VAT would be implemented as sole tax on processed milk, official sources said.
The Pakistan Dairy Association chairman PDA Sarfraz Rehman maintains that imposing VAT on milk would push up prices of by Rs8 on retail level.
“We had asked FBR to zero-rate only milk not its value added products as it is basic staple food and crucial for child nutrition,” he said. The dairy farmers association is seeking exemption from VAT only and it has not demanded any relief in income tax and tax due on value added dairy products like ice cream, butter, cheese, chocolates and others.
The official sources said that the FBR has decided to end taxes and duties on milk products after several meetings with people concerned with livestock and dairy sector.
They said dairy industry claimed huge tax refund every year. By zero-ratting the milk processing industry, the prices of packed milk will come down and burden of tax refund would be eased out, they mentioned.
Pakistan is the sixth largest milk producer in the world but its contribution in global dairy market is very negligible. The relevant authorities in the government are trying to evolve a tax regime that would help promote dairy exports, sources said.
The sources said that Pakistan Dairy Association (PDA) in a recent presentation to the ministry of finance, FBR and International Monetary Fund (IMF) said that prices of packed and loose milk would rise by upto Rs8 on the impact of the VAT and other taxes on the dairy industry, which is getting milk as raw material from the agriculture sector.
The PDA Chairman in its presentation had pointed out the prices of both lose and packed milk would be increased Rs5 to Rs8 a litre if the 16 per cent VAT would be imposed on the milk sector which is basic food staple and vital for child nutrition. It was pointed out that the dairy industry is zero-rated globally, which was admitted by the IMF.
The PDA Chairman in the presentation to the ministry of finance and FBR informed that packed milk is costing at Rs58 per litre. The industry has been paying average Rs33 per litre to the producer of milk, Rs10 per litre is Tetra Pack cost, Rs3 each per litre is processing storage, and logistic cost, and Rs5 a litre is trade cost. The industry is getting only 10 per cent margin, which is not actual profit but includes other overhead expenses as well, they mentioned.
The PDA informed that if the VAT was imposed on the milk industry they would pass it on in the retail price, which would rise by Rs8 per litre. The impact of VAT would also affect the loose milk price and it would reach Rs55 to Rs57 a litre from current range of Rs48 to Rs50 per litre.
Source The News
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