Edible oil import Customs begin collecting 16 percent FED

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Some Collectors of Customs on Tuesday rectified an error by collecting 16 percent standard rate of Federal Excise Duty (FED) on the import of edible oil instead of 17 percent. It is learnt that the customs in Karachi is collecting the accurate rate of 16 percent FED on the import of edible oil whereas Model Customs Collectorate Peshawar is still reportedly charging 17 percent FED on the import of the said item.

The anomaly has been pointed out by the industry which has been rectified by certain collectorates. Industry sources stated that the price of vegetable ghee and cooking oil is likely to decline nominally after the revision of FED rate by nearly Rs 2/kg approximately. Vegetable ghee/cooking oil are heavily taxed items and account for nearly 35 percent of retail price. Revision of FED from 17 to 16 percent would have a slight impact on the price of the commodity. The period during which higher rate of 17 percent FED was collected, adjustment of one percent FED may be allowed by the FBR.

When contacted, tax experts said that the edible oil and vegetable ghee/cooking oil are subject to Federal Excise Duty @ 16 percent ad Val, vide Table 1 to First Schedule of Federal Excise Act, 2005 read with section 3 of said Act. Moreover, the edible oil is further levied with additional FED @ 1/kg (Rs 1,000/M.Ton) in value addition mode under notification no. S.R.O 24(I)/2006 dated 7th January, 2006.

Since edible oil falls under the statute of Federal Excise Act, 2005, therefore, it has been granted exemption from Sales Tax vide entry no. 24 to the Sixth Schedule of Sales Tax Act, 1990. In the Finance Act 2013-14 the rate of sales tax has been enhanced by 1 percent, ie, from 16 percent to 17 percent retrospectively wef 13th June, 2013, whereas no change in the rate of FED has been made, which is still 16 percent. Both Sales Tax Act and Federal Excise Act are entirely different tax laws with separate powers to deal with sales tax and federal excise related issues.

Erroneously the customs Collectorate kept on charging duty @ 17 percent on import of edible oil till July 19, 2013. The industry approached FBR for clarification and the Board reviewed the case and resultantly the Collectorates have accepted the industry's view point and revised the acceptance of duty from 17 percent to 16 percent wef 19th July, 2013. Now the consignments of imported edible oil are being charged FED @ 16 percent as mentioned in Federal Excise Act, 2005, they added.

It is expected that the tax department would adjust the excessive FED charged on consignments that arrived between June 13, 2013 and July 19, 2013. It is suggested to adjust the excessive FED paid earlier at import stage in the consignments arriving on and after 20th of July, 2013. After the settlement of issue of rate of FED on edible oil now the consignments are being charged at standard rate of FED @ 16 percent, they added.

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