According to Karachi-based analysts, InvestCap Research, Pakistan’s Federal Bureau of Revenue (FBR) is proposing to increase Federal Excise Duty (FED) on the cement industry by PKR200/t (US$2.4). The plan has been submitted it to the Ministry of Finance for approval. This will act as a backup if the Reformed General Sales Tax (RGST) bill does not receive parliamentary approval in the coming months. This proposes an increase of FED on certain items, including cement, which is currently being paid by cement manufacturers at the rate of PKR700t.
In the Pakistan government’s FY10 budget, FED on cement was reduced from PKR900/t to PKR700/t, as the government sought to boost the construction sector by lowering the price of cement. However, FBR’s current proposal will take the FED back to the PKR900/t. This is expected to increase the price of cement by PKR10/bag.
According to FBR, a rise in FED will increase the amount of total duty collection on cement by PKR5bn. In addition, the government has also proposed to increase the Special Exercise Duty (SED) from one to two per cent. If this proposal is put into action, industry experts expect cement prices to increase by four per cent, to around PKR360 per bag in the north and PKR344 per bag in the south.