Experts told Business Recorder that the change in the regime of ''minimum mode'' to ''final mode'' on the import of edible oil by industrial undertakings would not have revenue impactions, but it will also streamline the tax payment process for the documented industry.
At present, import of edible oil is subjected to advance income tax (AIT) at rate of 5.5% in minimum mode vide section 148(8) of Income Tax Ordinance, 2001. Earlier, the rate of this tax was 2% in full and final mode which was converted into minimum mode at same rate in year 2009 vide circular No 3 of 2009, dated 17 July 2009, for industrial undertaking.
Previously, the tax collected from person on the import of edible oil was to be treated as final tax under section (u/s) 148 of Income Tax Ordinance, 2001. By virtue of amendment made through Finance Act 2009, the tax so collected is treated as minimum tax. However, the tax collected on packing material by manufacturer of edible oil treated as minimum tax meaning thereby that from tax year 2010 and onwards, the manufacturer of ghee & cooking oil filed returns u/s 114 instead of filing statements u/s 115 of the Ordinance 2001.
Up till 2009 a general rate of 2% was applicable to imports. In 2009, the same was raised to 4% on the value of goods imported. Further a new sub clause (9A) was added to Part II of Second Schedule wherein the tax u/s 148 was collected at reduced rate of 3% on import value of raw material imported by an industrial undertaking for its own use, but in minimum mode regime.
Subsequently, in the year of 2010 through Finance Act, the rate of AIT for commercial importers was enhanced from 4% to 5%, whereas for industrial undertakings for their self use remain covered under clause (9A) of Part II of Second Schedule at rate of 3 percent.
In the year of 2013 vide FBR circular No 6 of 2013, dated 19 July 2013, the rates of collection of tax in case of imports were rationalized at 5 % for industrial undertakings and 5.5% for commercial imports. The rate of AIT for industrial and commercial imports were made identical at rate of 5.5% vide FBR circular No 2 of 2014, dated 17 July 2014. Whereas, for commercial imports it is in final mode and for industrial undertakings it is set in minimum mode.
In Finance Act 2015, the sub clause (13 C), of Part II of Second Schedule was omitted and yet an another section 148A was introduced according to that the manufacturers of cooking oil or vegetable ghee or both shall be chargeable to tax at rate of 2% on purchase of locally produced edible oil. The tax payable u/s 148A is treated as final tax in respect of income accruing from locally produced edible oil.
In this historical perspective, the anomalies in rate of taxation and its regime (minimum and final mode) edible oil sector has proposed the FBR to convert the minimum mode into final mode for the purpose of import of edible oil by industrial undertakings.