Pakistan Poultry Association is receiving demands for Value Added Chicken products from a number of countries of European Union particularly Spain, France and also from Canada, Saudi Arabia and other GCC countries. Most counties want to ascertain whether the exporting country has regulations, which would enable their exporters to export disease free, safe, healthy and hygienic food, free of bacterial contamination, etc.
Last year, the Saudi Government sent their inspection team to inspect the Poultry & Meat Processing Plants that were desirous of exporting to Saudi Arabia. They approved some poultry processing units and some meat processing units but laid down an observation that the Government of Pakistan had no regulations for inspection of slaughter houses for ensuring contamination free and hygienic food production. As such, though huge amounts have been paid by the processing plants, the exports are held in abeyance.
Presently, soybean meal is not being produced in Pakistan and hence poultry sector meets its requirement by importing from abroad. In Federal Budget 2014-15 Government introduced import duty @ 5% and sales tax @5% thereon, which increased the cost of production of poultry products tremendously. Soybean Meal is very rich source of vegetable protein and is being used as an essential poultry feed ingredient. It constitutes more than 15% of poultry feed. Poultry feed is major component, which is around 70 percent of total cost of production of poultry products.
In view of above, it is requested to kindly withdraw the custom duty and sales tax on the import of soybean meal (PCT Heading 2304-0000), enabling poultry sector to keep supplying cheap poultry products to the masses. Moreover Commercial Importers are importing soybean must be treated at par and no custom duty, Income duty and sales tax be charged from them.
The Federal Government granted concession of sales tax on the import of plant and machinery through notification SRO 727(1)/2011, with condition the commercial importers of poultry plant and machinery have to deposit good –for –payment cheques or pay orders or bank guarantees to custom authorities, equal to the amount of balance tax (12 Percent) payable at import stage. After that the importers require to submit the evidence (copy of sales tax return) of onward supply of machinery to registered poultry farmer for the release of said pay-orders/bank guarantees.
It is submitted that the poultry farmers of small scale business, which are large in number, cannot afford overhead expenses in respect of sales tax registration and submitting monthly returns etc. So they, being unregistered person, cannot avail the benefit of sales tax concession on machinery imported for poultry farming. It is therefore requested to kindly withdraw the condition of depositing pay-orders/bank guarantees and then submitting the copy of sales tax return, to provide the benefit of sales tax exemption to poor small poultry farmers. It is worthwhile to mention here that imported machinery will ultimately be used for the production of poultry.
Pakistan Poultry sector approached to FBR to restore “Zero Rating “status for value added, Processed, frozen and packed poultry products in the best interest of both the poultry sector and masses.
After the withdraw of zero rating status to the sector the cost of production of processed value added chicken products has gone up by Rs.20 to 40 per kilogram. When we import our inputs for the preparation of value –added products these are subject to import duties ranging 5 10 30 percent plus les tax 17 percent , while all our food grade packing materials, electricity , fuel, lubricants ,refrigeration gases , sanitizers etc., are also subject to 17 percent sales tax which , after the withdrawal , has become part of the cost . Therefore it is requested that zero rating be restored on processed chicken falling under PCT 0207, 1601 and 1602.
It is dire need of poultry sector to use quality imported ingredients/inputs to produce value-added chicken products of export quality. Presently these inputs are subject to higher import duty and Sales tax thereon, which makes them expensive and ultimately the cost of chicken products increased much .Hence exporters of value-added chicken products face problem while competing in international market. It is therefore proposed to allow duty & sales tax free import of following inputs (raw material) for producing low-cost value –added chicken products. Then it will make exporters in a better position to offer competitive prices to win more export orders.
1000 Skimmed Milk
9000 Brines & Gels
1200 Peppers (crushed or ground )
3200 Spices powder
1100 Ginger (neither crushed nor ground )
1200 Ginger (crushed or ground )
3000 Turmeric (curcuma )
9100 Mixtures referred to in Note 1 (b) to this Chapter
9910 Thyme.bay leaves
9990 Others., Spices extracts , Natural Shelf life Enhancers
.3900 Meat Binders
0000 Vegetable oil
1000 Crisp bread
2000 Gingerbread and the like
3100 Sweet Biscuits
3200 Waffles and wafers
4000 Rusk, toasted bread and similar toasted products
9000 Breads, Crumbs ,Pasty , Cakes ,Biscuits, and other
Bakers wares, whether Or not containing cocoa, communion wafers, empty cachets of kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products.( specific requirement for value-added chicken products only)
1000 Soya Sauce
2000 Tomato ketchup and other tomato sauces
9000 Seasonings, Marinades, Sauces
1000 Broth Powder
9030 Flavoring Powders
0010 Table Salt
0020 Rock Salt
0030 Sea Salt
0090 others., Denatured salt , pure sodium whether or not in aqueous Solution or containing added anti- caking or
Free flowing agents, sea water.
The Grand Parent Stock is basic seed (raw material) for the production of poultry products (parents Stock, Broilers and Chicken meat etc.). At present it is not producing locally and is being imported from abroad at existing import duty @ 5 percent .However the same of import duty i.e. 5 percent is applicable for aforesaid poultry products which are all being producing locally .Presently , poultry sector is producing enough to fulfill local demand and further surplus production can be exported.
Since FBR always discourage the application of same rate of import duty on raw material and on its finished goods. The same matter is here which is against the philosophy of FBR. Therefore it is recommended that higher import duty on following poultry products at the rates mentioned against each item should immediately be imposed:-
|H.S Code||Description||Existing Import Duty||Proposed Import Duty|
|0105-11000407-0010||Grand Parent Stock for broiler and for Layer (day old chicks & hatching eggs to produce Grand Parent Stock)||5%||5%|
|0105-11000407-0010||Parent Stock for Layer (Egg Type) (day old chicks & hatching eggs to produce parent stock for layer)||5%||5%|
|0105-11000407-0010||Parent Stock for broiler (day old chicks & hatching eggs to produce Parent Stock for broiler)||5%||25%|
|0105-11000407-0011||Broiler day old chicks and Hatching eggs to produce broiler chicks||5%||25%|
|0207-11000207-12000207-13000207-1400||Chicken meat unprocessed, processed and further processed / frozen / all kinds.||25%||100%|
The higher import duties as imposed above will save poultry sector from any set back. It will increase FBR revenues and will save the foreign exchange being spent unnecessarily, avoid import o low quality poultry products, enhance self regulation of supply demand in poultry, prevent loss to poultry farmers due to unplanned increase or decrease in production stock. This will also stabilize the fluctuation in poultry market.
Being agricultural product, withholding tax on poultry sector is exempted under income tax ordinance 1979. The relevant exemption under serial (v) of SRO 586 (1)91 of Income Tax Ordinance 1979 stated as under:
“Persons receiving payments from a company exclusively for the supply of agricultural produce (including fresh milk, , live chicken bird and eggs ) by any person engaged in poultry farming and by an industrial undertaking engaged in poultry processing which has not been subjected to any process other than which is ordinarily performed to render such produce fit to be taken to market”.
In view of the above no sales/withholding tax be imposed on following Vegetable Protein Source being used as raw material of poultry feed as mentioned in the SRO 5/75:-
Sesame Seed Meal.
Other Vegetable Protein Meals.
Worldwide, there are subsidies on export of processed chicken. Like European Union most exporting countries provides an export subsidy of 0.325 Euro cents per kg of frozen chicken exported (Source: The Rural Payments Agency – www.rpa.gov.uk). But we do not subscribe to the provision of subsidies. However, there is a need to bring down the cost of Production of the poultry processing plants by increasing their capacity utilization particularly in the face of power and gas outages.
Bilateral Trade Agreements such as FTAs and MFNs with countries which have different regulations, require those protocols to be met, defeat the principal of level playing field; for instance, Malaysia and China, for the production of Halal meat, allow stunning of animals before slaughter. In Pakistan, it is forbidden to stun the birds before slaughter. Non-stunning slaughter increases the cost by almost 8.5%. These countries also have a regulation of inspecting the processing plants of an intending exporter, as such, they pick the very best where obviously the cost is higher. On the other hand, we can import from any producer, in fact, from a producer who is the cheapest and not necessarily who meets the standards of quality – this result in erosion of our capacity utilization.
The biggest foreign exchange earnings potential of poultry products, other than hatching Eggs and live chicks, lies in processed and ready to cook/ready to eat items. A poultry meat processing plant is highly capital intensive, and capital generated through bank loans carry a very high mark – up rate. The impact of high mark- up rate bears heavily upon the cost of production. It is suggested that as a financial incentive TDAP Should share at least 50% of the mark-up with the exporters to enable them to complete in international market.
It is difficult for the producers of poultry products to fully benefit from the Duty Draw Back Schemes. The major reason being that the duties /Sales tax levied on various components , items etc, pertaining to poultry breeding , that are imported by the third parties at different levels, are passed on to the exportable poultry product. To Quote a few example, grandparent chicks, which ultimately lead to the production of meat producing broilers, are imported and import/customs duties etc, are paid at that stage. Similarly Soybean meal a very important component of poultry feed along with additives , vitamins, medicines and vaccines are also imported on payment of duties, sales tax etc. All these duties plus sales tax on electricity bills levied at many stages which are paid by different items producers, are passed on to the producers of exportable product who are unable to claim these taxes/duties that are added to inputs as duty draw backs. It is therefore imperative that the benefit of duty draw back on the above said items that constitutes between 10% to 12% of the production cost, should be passed on to the exporters of poultry products as exports rebate.
No Freight Subsidy is available to the exporters of poultry products. It will be of interest to mention here that india the biggest competitor, under its Freight Subsidy Scheme 2013 extends from 75% to 90% reimbursement of transport costs incurred on the transport of raw material and finished products, to its Industrial sector. It is suggested on the transport of raw material and finished products, to its Industrial sector. It is suggested that poultry producers should also be extended reimbursement of 90% of its transportation costs incurred in exporting of their products.
During 2011 turn over tax was increased from 0.5% to 01.00% for all industries by the FBR. Pakistan Poultry Association submitted to Federal Board of Revenue that payment of 01% turnover tax for the poultry sector is not viable, therefore in January, 2011 FBR issued notification to reduce turnover tax for Poultry Sector only from 1% to 0.5%.
Afterwards in 2012 the turnover tax was reduced to half, whatever was being paid by the different industries. According to that turnover tax on poultry sector was required to be reduced from 0.5% to 0.25% w.e.f June, 2012, which could not be reduced by the FBR and yet it is not notified. It is again requested that it should be reduced forthwith.
The sales tax @ 16% on the electricity bills is being charged under section 3 (1) of sale tax Act 1990 and withholding tax @ 10% under section 235(4) (A) of income tax ordinance, 2001. Poultry and its product being food item are exempted from levy of sale tax as per 6th schedule of sale tax act, 1990. Sales tax on electricity bill simply increases the cost of production of poultry products as this levy cannot be get refunded. Secondly we cannot pass it on to consumer because the price of poultry & poultry products are determined by market forces (supply and demand).
It is therefore requested that poultry producing units may kindly be included in the classes of industry that are exempted from the levy of sale tax @ 16% and withholding tax @ 10% on electricity / gas bills.
Grandparents are a multiplying seed, which produce parents, which subsequently produce broiler chicks and end up in chicken meat on the table of the consumers. Seeds of all kinds have been exempted from any additional tax. Grandparents, though being seed have been taxed. While finished chicken meat and its value added products are allowed to be imported duty-free from Malaysia and on preferred lower rate of import duty from China and at only five percent duty from India, Even though India has placed imports from Pakistan on their Sensitive List, yet further encouragement is being given to imports by increasing the cost locally-produced chicken meat and poultry products. The imported raw materials, which are used for the production of value-added chicken products, have been subject to an additional import duty of five percent. While raw materials have been generally exempted from additional tax, wrath of the government has fallen upon the poultry sector.
Levy of 30 percent regulatory duty on import of corn, almost 70 percent of which is consumed by the poultry sector, is a very important component of poultry feed, would increase the cost of production of poultry meat and eggs. It will be highly appreciated if 10% import duty imposed on Seeds and 30% Regulatory Duty on import of Corn is withdrawn immediately.