The federal government has decided to released cottonseed from 5% sales tax in line with a recommendation given by the Ministry of National Food Security and Research.
The matter is subject to final approval by the Economic Coordination Committee (ECC) of the cabinet.
The Ministry of National Food Security has prepared a summary for presentation in an ECC meeting and its copy has also been forwarded to the Ministry of Industries, Ministry of Finance and Federal Board of Revenue (FBR).
According to the media report, about 1,200 ginning factories are currently in the business of extracting lint from cottonseed, which is also utilized by 6,000 edible oil factories.
Pakistan’s annual cotton produce yields about 4 million tons of cottonseed, from which about 400,000 tons of edible oil is produced, which constitutes about 60-70% of the total edible oil produced in the country.
Consequently, the production of edible oil is going down. This poses a risk for the country because it will be required to import edible oil in huge quantities in the near future, which will put pressure on the country’s foreign exchange reserves.
Pakistan’s annual cotton produce yields about 4 million tons of cottonseed, from which about 400,000 tons of edible oil is produced, which constitutes about 60-70% of the total edible oil produced in the country.
Although the FBR maintains that the decision on the exemption would be taken by the ECC, it has itself introduced a new sales tax collection system, according to which cotton ginners are being taxed at Rs7-8 per maund. The FBR has also made it mandatory for all the ginners to get registered for sales tax payment.
In a notification issued earlier this year, the FBR laid down a special procedure for sales tax collection from the composite ginning units involved in the extraction of edible oil from cottonseed.
According to the notification, all ginning units, whether registered and unregistered with the FBR, were liable to pay Rs7 per maund in sales tax on cottonseed until June 30, 2019 while from July 1, 2019, they would be required to pay Rs8 per maund in sales tax.
