ISLAMABAD: The federal government is going to abolish zero-rating facility to the dairy sector to collect Rs8 billion revenue.
However, the owners of milk processing units and milkmen would earn extra Rs280 billion next year and the milk price will increase by Rs7 per litre.
The government is planning to recommend to parliament that it grant tax exemption status to the dairy industry, which will result in the discontinuation of tax refunds facility. This has been done on the behest of the largest market players that had initially proposed the changes in the tax structure to avoid dealing with the FBR.
The FBR is withholding Rs11 billion refunds of the dairy industry of the last two years that the sector paid at input stage but the FBR never refunded the amount.
The industry pays 17% sales tax on raw material and packaging materials and another 27% on freight and energy costs. The FBR subsequently refunds this amount to the dairy sector producers that ranges between Rs5 billion and Rs8 billion annually.
