Clarification & Reply of Queries

Clarification & Reply of Queries

[Reported by “Business Recorder” dated 20-01-2006]

Vegetable ghee makers asked to pay 15pc GST on byproducts.

ISLAMABAD: The Central Board Revenue (CBR) has asked the manufactures of vegetable ghee to pay 15 percent general sales tax (GST) on the byproducts, including oxygen gas, soap and oil dirt. Official sources told Business Recorder here on Thursday that the manufactures of vegetable ghee have to pay 15 percent sales tax on the taxable byproducts, including CO2 and oxygen gas, soap and oil dirt.

According to a Federal Excise General Order (FEGO) 1 of 2006, if a manufacturer of vegetable ghee is producing hydrogen gas within his premises for use in the manufacture of final product, i.e., vegetable ghee, its consumption within the same premises is exempted from the sales tax.

However, this exemption will not apply to such hydrogen gas, which is not manufactured within his own premises or is either purchased/supplied by the manufacturer of vegetable ghee. It has also been clarified that the sales tax on other taxable byproducts such as CO2 and oxygen gas would be separately payable at the standard rate of 15 percent.

As per the order, the Federal Excise Duty (FED) at the rate of Re.1 per kg has been levied at the import stage on edible oil, including crude oil as well as vegetable ghee and cooking oil in lieu of duty payable on value addition at local manufacturing stage, through SRO.24(1)/2006.

Subsequently, some queries have been raised seeking clarifications.

Accordingly, following clarifications being issued for uniformity of compliance:

Query1: Whether payment of FED @ Rs.1 per kg at import stage is the final liability under the Federal Excise Act, 2005?

It was clarified that the payment of FED @ Re.1 kg at import of stage constitutes that discharge of final liability in respect of manufacturing/production of edible oil, ghee and cooking oil, and no Federal Excise Duty is chargeable on the domestic production of the said items.

Query2: What type of returns would be required to be filed by the manufacturer of edible oil/ghee/cooking oil?

A simplified Federal Excise return has been prepared for the manufacturer of edible oil, ghee and cooking oil (Annex-A), which is to be filed by the manufactures falling in purview of above said SRO.

Query3: Whether crude palm oil is included in the scope of SRO 24(1)2006?

It was clarified that the crude palm oil classifiable in PCT heading 1511.1000 is covered under SRO 24(1)/2006.

Query4: Whether the excise duty paid on import stage would be refundable on export of ghee/cooking oil?

It was clarified that under Section 5 of the Federal Excise Act, 2005, drawback of duty paid on goods used in the manufacture of goods exported out of Pakistan is admissible. Therefore, the exporters of ghee/cooking oil are entitled to the drawback of FED paid at the import stage.

Query5: Whether the adjustment of sales tax paid on other inputs, e.g., tin plate, chemicals, utilities, etc., would be allowed?

As payment of fixed excise duty of Re.1 per kg is in lieu of the net excise duty payable at the manufacturing stage, no adjustment of inputs would be admissible.

Query6: What would be the status of taxability of hydrogen being manufactured from natural gas as part of the manufacturing process of ghee/cooking oil?

It was made clear that in accordance with the Board’s ruling of October 3, 2003 if a manufacturer of vegetable ghee is producing hydrogen gas within his premises for use in the manufacture of final product, i.e., vegetable ghee, its, consumption within the same premises is exempted from the sales tax. However, this exemption will not apply to such hydrogen gas, which is not manufactured within his own premises or is either purchased/supplied by the manufacturer of vegetable ghee. It was also clarified that the sales tax on other taxable byproducts such as CO2 and oxygen gas would be separately payable at the standard rate of 15 percent, the clarification added.

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