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The government has acknowledged that increase in sugar, edible oil and steel prices might have contributed to the inflation in the country and price hike is mostly emanating from oil, gas and electricity tariffs adjustment and inflationary expectation in economy. This has been submitted by the Federal Board of Revenue (FBR) in a presentation to the sub-committee of the National Assembly Standing Committee on Finance, constituted to look into the factors after taking briefing on taxes as well as other economic decisions' contribution to the inflationary pressure in the country.

The FBR argued in the brief that increase in income tax rates of individuals' category is anti-inflationary as they reduced disposal income of high earners while on the other hand, the sales tax/FED measures are aimed at high-end consumption tax increase and they will not contribute to the inflation. Additionally, it claimed that sales tax and FED measures are having impact on areas that do not carry much weight in Consumer Price Index (CPI).

The FBR conceded that three things which might have contributed to inflation are tax increases on sugar, edible oil and steel. It is FBR's stance that there is only a tax impact of Rs 3.60 per kg for sugar, Rs 2 per kg for ghee and cooking oil and none in steel. The price hike is mostly emanating from increase in tariffs of oil, gas and electricity or from inflationary expectation in the economy, the Board added.

Additionally, the FBR further stated that there is a need for price control committees of the provinces to be proactive to effectively handle the excessive profiteering.

The FBR added that GST occupies a pivotal role in the current regime of taxation and is a consumption-based tax. However, the GST regime is structured in a manner targeted towards placing reduced minimal burden upon low and middle income segments of society.

The FBR argued that basic human needs are either not subject to GST or are taxed to a minimal extent and basic food items such as unprocessed agriculture produce, dairy products, grains cereals pulses, meat, fish poultry eggs, fruits, vegetables, products of milling Industry, etc, are exempt from payment of sales tax.

Some of these items, if branded and sold in retail packing such as dairy products excluding milk, prepared meal and poultry products such as sausages and products of milling industry excluding flour are subject to reduced tax rate of 10 percent. All the medicines and their raw materials and inputs are fully exempt from payment of sales tax; furthermore, equipment relating to treatment of diseases and purchases made by hospitals are also generally exempt from payment of sales tax, the FBR added in its brief presented to the sub-committee of the finance committee.

Copyright Business Recorder, 2019

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