September 12, 2013

In the best interest of both the sector and masses, the PakistanPoultry Association (PPA) has appealed to the government to restore 'zero rating' status for value added, processed, frozen, and packed poultry products.

PPA Chairman, Khalil Sattar, in his letter to Finance Minister Ishaq Dar, requested that 'zero rating' be restored on processed chicken and value-added chicken products falling under PCT Headings 0206, 1601 and 1602 because after the withdrawal of zero rating status to the sector the cost of production of processed value-added chicken products has gone up by PKR20 to PKR40 (US$0.19-0.38) per kilogramme.

Prior to the budget 2013-14, both value added milk products, including flavoured milk, yogurt, cheese, butter, desi ghee, whey and cream, etc. and similarly, all value added chicken products were zero rated.

In the budget 2013-14, zero rating was withdrawn from both the products. However, subsequently, zero rating on packed and all value added milk products has been restored but not on packed value added chicken products. This has given a further edge to imported poultry products and to the unorganised sector because imported chicken under Free Trade Agreement (FTA) with Malaysia is free of import duties and under FTA with China subject to 15% import duty with sales tax exemption, the PPA Chairman said.

Khalil Sattar said that FTA is already a setback to local production as since the FTAs were signed some of the multinational fast food chains have started importing their requirements from Malaysia and China and a local value added processor has stopped local production and started importing finished products from Malaysia and repacking them in their brand for sale.

Due to this withdrawal of zero rating status, the unorganised sector is getting more benefits, pays no taxes at all whereas the organised sector pays all kinds of taxes. This clearly shows that withdrawal of zero rating has given rise to an uneven playing field against the imported chicken products as well as the unorganised domestic sector, Sattar said.

The PPA chairman also highlighted that from 1979 to 1998, a number of processing plants were established but suffered heavy losses at the hands of the unorganised sector and were forced to close down.

He further said that presently out of the total agri products, which is about 21 % of the GDP, only cotton, wheat, oilseeds, partially milk and about 1 % of the poultry is in the tax net through processing and value addition, as rest of the produce is sold through the unorganised non documented economy.

He also sighted that many developed countries, which have much higher per capita income than Pakistan, have zero rating or a preferred very low rate of VAT on food products. In developed countries like UK/EU not only poultry and poultry products in all forms are zero rated but also food/feed for poultry and game birds.

He also requested that in order to compete with the imported products, inputs falling under PCT Headings 0904.1200, 0910.9100, 1905.9000, 2103.9000 and 2501.0090, which go to make value added products be allowed to be imported free of customs duty encouraging the multinationals to source their product from the local producers thereby saving valuable foreign exchange of the country.