VAT threat to Pakistan cement sector

VAT threat to Pakistan cement sector
Published: 04 June 2010

The Pakistan cement sector may face some tough times after the imposition of value-added tax (VAT), as the sector is already under the huge tax burden, industry officials told Daily Times.

The sector may also witness some negative developments in the upcoming budget of fiscal year 2010-11, as unlike past budgets lower Public Sector Development Programme (PSDP) targets and implementation of VAT this time, would remain key concerns for the sector, they added.

The 16 per cent general sales tax on cement sales would be replaced with 15 per cent VAT. A one per cent reduction in VAT would have no impact as cement margins are already declining due to excess supply in the country, they said.

Documentation at dealers’ stage through VAT may result in slowdown in sales or some increase in final consumer price. Moreover, cement dealers with annual turnover of Rs 7.5 million would be brought under the VAT regime.

The federal excise duty of Rs 35 per bag would remain intact next year, as the cash crunched government would not reduce any avenue for tax collection, they said, adding that the government has already allowed in-land freight subsidy of 35 percent to cement manufacturers to enhance export sales and this is likely to continue next year.