They said that the GST gap is not very significant for last five years by the cement companies at compliance rate of almost 75 percent. Moreover the same companies are providing income tax of over Rs11.811 billion. They said that the FBR is now contemplating upon different options to take the required steps in the upcoming budget 2019-20 for this sector to materialize the target of revenue collection when it has to collect Rs5,550 billion in the upcoming financial year under the possible IMF program of $6 billion.
They said that the tough times will get tougher as the country prepares for the upcoming battle of the new budget. They said another increase in FED and changes, particularly the duty on coal, would wreck cement manufacturers and as a consequence consumers, which would in turn further shrink demand. They said that the government in previous budget had also exercised changes in the Federal Excise Duty (FED) mechanism from variable 5 percent of Marginal Retail Price (MRP) to a fixed Rs1/kg (Rs50 per bag).
This change not only increased existing FED on 50kg bag but also increased sales tax in absolute terms as sales tax was being calculated on top of FED earlier. Consequently, prices increased by around Rs35-55 per bag. In previous budgets, the government had also increased customs duty on import of clinker from 2 percent to 11 percent, which was positive for local industry and discouraged clinker imports.
The industry stakeholders have strongly condemned the imposition of federal excise duty (FED) on cement in the budget for the Fiscal Year 2019-20. They further said that the Federal Board of Revenue has already imposed regulatory duty (RD) on steel, adding that the imposition of enhanced FED on cement would further affect the construction industry.
They said that a reduction in the Public Sector Development Program (PSDP) has already forced cement producers in the northern region to reduce prices by around Rs150 per bag. Earlier, cement prices in the north crossed Rs600 per bag and then began falling when the new government introduced austerity measures and slashed the development budget.
They said that positive programs for Pakistan's housing developments and cement demand in recent months had been dampened by changes to bank and interest rate rises, as well as expected lower fiscal expenditure by the government.