Shipbreakers on Thursday refused to accept
the current rise in sales tax and income tax and urged the Federal Board of
Revenue (FBR) for a level playing filed for all stakeholders. Chairman of the
ShipBreaking Association of Pakistan Dewan Rizwan Farooqi said that the
industry was already facing several internal and external issues, while the
increase in sales tax and income tax had compounded the situation for the
ailing industry.
On February 26, FBR issues
SRO 140, increasing the incidence of income tax on the shipbreaking industry,
raising it from one percent to 5 percent. Subsequently, SRO 243 was issued on
March 26, raising the sales tax ratio. As per new SRO, shipbreakers will now
pay Rs 5,860 per ton sales tax, instead of the previous rate of Rs 4,840 per
ton, he said.
Meanwhile, the FBR provided some relief to
melters: they are now paying sales tax at the rate of Rs 3,200 per ton, down
from Rs 5,600 per ton, he said. The current rise in income tax and sales tax
had directly affected shipbreaking activities at Gadani, employing as many as
25,000 workers, Farooqi said.
"We are unable to finalise new shipbreaking
deals. The current rise in income tax and sales tax will directly increase the
cost of dismantling (ships)," he said. Since 1994, ship breakers had been
paying income tax at the rate of 1 percent at import stage on cost and freight
(C&F) value of scrap vessels under Section 148 of the Income Tax Ordinance
which was treated as full and final liability, he said in a letter sent to the
chairman of FBR.
Melting industry, he said, were currently
liable to pay just 1 percent income tax while ship-breakers were being made to
pay 5 percent income tax, which "is a serious anomaly and not at all
justified". "The ship-breaking industry is the only revenue
generating business employing local labour in the least developed
Balochistan," Farooqi said, adding that ship-breakers were struggling to
keep this sector viable in the absence of electricity, gas, water, sewage and
above all poor condition of roads.
He said that the shipbreaking-industry
contributed Rs 1.509 billion on account of income tax during the period between
July 2008 and June last year, while an additional amount of Rs 14 billion was
paid as sales tax during the same period. However, despite making this
contribution, shipbreakers are being made to pay sales tax at the rate of Rs
5,862 per ton, instead of the previous rate of Rs 4,840 per ton. "This is an increase of nearly 23 percent in sales tax."
According to him, melting industry had been
provided a huge incentive of 43 percent reduction in sales tax. This reduction,
he said, would result in an annual loss of nearly Rs 9.6 billion to the
national exchequer. Farooqi suggested that the FBR should impose a single tax
at the rate of 2.75 percent under Sections 148 and 153 as full and final
liability of shipbreakers, instead of two taxes - income tax withholding tax.
He said that all taxes already paid should
be treated as final liability and no further tax/arrears should be demanded
from shipbreakers. He has also urged the FBR to reduce sales tax on ship
breakers up to Rs 3,200 per ton, instead of charging Rs 5,862 per ton.
"Timely action by the FBR will only
save ship-breakers from a complete collapse. It will also help them keep the
industry viable to provide quality and standard material to the steel industry
at competitive rates, besides generating revenue for the government,"
Farooqi said.
Source: Business
Recorder. 29 March 2013
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