May 26, 2011

Pakistan may impose 15% GST on poultry feed

The upcoming federal budget may add a general sales tax (GST) on poultry feed, and Pakistani poultry farmers fear paying an additional PKR1,000,000,000 (US$11.7 million).

The Pakistan Poultry Association's Lal Baksh Kolachi said in a press conference on Tuesday (May 24) that they have learned through reliable sources that a 15% GST will be imposed on poultry feed in the 2011-2012 budget. Eighty percent of farm expenditures relate to buying feed for the birds, so production cost will increase.

"We are currently buying the feed at around PKR32,000 (US$373.5) per tonne, which roughly translates into PKR9.6 billion (US$112 million) when the 6,000 poultry farms in Sindh are taken into account. These farms buy more than 3,000 tonnes annually," said Kolachi.

"Our sector has to pay income taxes and other taxes imposed on purchasing tools, equiptment and raw materials. We do not receive subsidised rates as the agriculture sector does," said a farmer.

According to Kolachi, applying GST on poultry feed is against taxation rules. "If the tax is not imposed on the produce, then it cannot be levied on the production cost either," he said.

India, Bangladesh, Thailand, Iran and China have avoided taxing poultry sector production in order to maintain affordable prices for their people. "Even developed countries like Australia, New Zealand, the US and the EU do not impose these taxes," added Kolachi.

A 15% GST was imposed in 1995 but the government withdrew it in the next budget because of farmer protests. Poultry farms dealing with broiler chickens are most likely to be affected by the tax, said Pakistan Poultry Association's Chaudry Ashraf. Nearly 3,900 farms produce broiler chicken and over 2,000 farms produce layer chicken. More than three million kg of broiler chicken are consumed in Sindh weekly, while the total production in Sindh is around 10 million.

Kolachi said that the government was also planning to impose GST on processed chicken. "Even though the consumption is 0.5%, it will still increase prices," he added.