Islamabad: After making a plan to increase tax rates on packaged milk, the government is also considering levying sales tax on all types of meat sold in retail packing, animal feed and seeds used to produce cooking oil to generate Rs13 billion in additional taxes.
This will result in an increase in prices of chicken sold by brands like K&N’s, Menu and Climax Farms in addition to pushing up prices of cooking oil.
The proposals are part of the budget 2016-17 revenue measures that, subject to clearance of Prime Minister Nawaz Sharif, will be presented to the National Assembly for approval on June 3, said sources in the Federal Board of Revenue (FBR).
However, independent economists say any decision to increase sales tax on food items may stoke inflation, as the edible items carry 34.8% weight in the Consumer Price Index-based inflation.
The government treats packaged food as ‘luxury’ instead of an essential item.
Under a condition of the International Monetary Fund (IMF), Pakistan is in the process of withdrawing tax exemptions and concessions that it extended to affluent segments and on socially sensitive products. It has already implemented two phases of SRO withdrawals. The proposals to increase sales tax on food items are part of the third phase, which will be implemented from July this year.
The FBR has proposed to withdraw sales tax exemptions on fresh, frozen or preserved meat of bovine animals, sheep and goat, uncooked poultry, sausages, poultry feed, cattle feed, sunflower seed meal, rapeseed meal and canola seed meal.
It has also proposed to increase sales tax on soybean meal, oil cake and other solid residues and soya bean seeds, according to sources. These items fall in the category of socially sensitive products, which the government had initially vowed to protect from additional taxes.
The estimated revenues from these items is at least Rs13 billion as against few million rupees that the government is generating on their sales.
It is not for the first time that the government is going to tax socially sensitive and food items. In the last budget, the government had imposed 10% sales tax on yogurt, cheese, butter, cream, desi ghee, whey and cream. It now plans to increase the rate to the standard 17% from fiscal year 2016-17.
In addition to that, it is also contemplating dropping a second white bomb on milk consumers by slapping 10% sales tax on branded fresh milk and fat milk to raise Rs11 billion.
All these items had been exempted from sales tax under SRO 501 that interestingly the government had issued on June 12, 2013 after assuming the office.
In the next budget of 2014-15, it revoked the SRO and shifted these socially sensitive items to Schedule 5 of Sales Tax Act 1990.
Now it wants to impose 5% to 17% sales tax on these items.
According to the budget proposals, the FBR has proposed charging 10% sales tax on uncooked poultry, poultry meat or meat offal and on all types of sausages to raise Rs1.5 billion. The FBR has also proposed charging 10% sales tax on meat of bovine animals, sheep, fish and crustaceans to raise Rs350 million.
It has proposed to charge 5% sales tax on poultry feed, cattle feed, sunflower seed meal, rapeseed meal and canola seed meal to raise Rs3.5 billion. The FBR has proposed to charge 17% sales tax on soya bean seed against the current rate of 6% to generate additional revenue of Rs3.5 billion.
According to another proposal, the FBR seeks parliament’s nod to increase sales tax on soya bean meal from 10% to 17% for generating Rs2.5 billion.
