The federal government has proposed to increase Federal Excise Duty (FED) on cement by almost 100 percent.
‘Currently, the domestic cement industry is paying FED in percentage, while as per budget proposals 2016-17, a fixed FED will be charged on cement from next fiscal year. “Cement is currently chargeable to FED at the rate of 5 percent of the retail price. Now, the federal government has proposed to replace the current regime with fixed rate basis at the rate of Rs 1 per kg,” the federal budget proposals said.
Current changes in the structure of FED on cement will result in over 100 percent increase in FED on local sales of cement. Presently, cement manufacturers are paying Rs 24 to 28 per bag (@ 5 percent per bag) as retail price of cement is some Rs 482 to Rs 530 per bag in the domestic market. However, with current proposal, cement manufacturers will be required to pay about Rs 50 per 50-kg bag FED instead of approximately Rs 25 per bag currently. While, Rs 1,000 FED will be charged on per ton cement.
The government has also proposed to increase duty on import of coal from 5 percent to 11 percent from the next fiscal year. This will impact Rs 7 per bag to the cement industry. Industry sources said that overall budget impact on cement will be Rs 32 per 50-kg bag. The cement prices are likely to reach Rs 550 to Rs 565 per bag from present rate of Rs 482 to Rs 530 per bag.
In addition, as per budget proposal 2016-17 announced by Finance Minister Ishaq Dar, in order to provide incentive and protect the local industry, custom duty on the cement clinker has been proposed to be increased. Commenting on this budget proposal, Muhammad Ali Tabba, Chairman All Pakistan Cement Manufacturers Association (APCMA) said the government proposal will increase the price of cement in the local market. “This proposal is against the industry’s” demand as we were seeking some relief in taxes to further enhance domestic dispatches, he added. It is believed that proposed change in FED rate will increase the illegal trade, ie, smuggling of cement into the country, he said. -Business Recorder