KARACHI: Customs authorities have started clearing edible oil consignments stuck up at ports since July 01, 2019, after the Federal Board of Revenue (FBR) clarified that Value Addition Tax (VAT) at the rate of 3.0 percent is not leviable on edible oil imports.
An official said exemption from 3.0 percent additional customs duty was available to edible oil imports as per Clause 58 of Sales Tax Special Procedure Rules 2007, however, the government in the federal budget rescinded the Clause 58 and introduced 12thSchedule, which provided 3.0 percent VAT on certain goods including edible oils.
This 3.0 percent VAT is not leviable on raw material and intermediary goods attracting Customs Duty less than 16 percent. Since duty is levied on edible oil imports on specific rates i.e. fixed rate of approximately Rs10,000/ton on oils, a confusion was created whether these goods are excluded from the ambit of VAT or not.
Due to this confusion, a number of edible oil consignments were stuck waiting clarification from the FBR.
Pakistan Vanaspati Manufacturers Association (PVMA) submitted that all variants of edible oils fully complied with the prescribed conditions and attracted customs duty much lower than 16 percent ad valorem, hence qualified to be exempted from levy of 3.0 percent ad valorem Sales Tax in VAT mode vide the 12th Schedule.
The FBR in a clarification issued on Wednesday noted that the imported edible oils such as palm oil, which are imported for further manufacturing of ghee/cooking oil, are subject to Customs duty at specific rates and not at ad valorem rates.
“It is accordingly clarified that in case of such raw materials/intermediary goods, which are subject to customs duty at specific rates, equivalent ad valorem rate may be worked out, and 3.0 percent VAT may not be charged where such equivalent ad valorem rate is less than 16 percent,” the FBR said.