LAHORE: The Economic Commission constituted by Lahore High Court (LHC) on beverage industry has referred to the policy note initiated by former Competition Commission of Pakistan (CCP) Chairperson Rahat Kaunain Hassan to withdraw ‘discriminatory’ capacity tax on beverages for providing a level playing field.
The LHC had constituted two commissions – Economic Commission and Beverage Commission. The Economic Commission was assigned to evaluate whether imposition of capacity tax has any negative impact on a beverage manufacturers. The objective of Beverage/Technical Commission was to find out difference between different technologies of filling valves installed in the beverage industry resulting in more output capacity of filling valves installed at one manufacture as compared to another.
The EC report has been prepared by the commission comprising three reputable chartered accountant firms. In case of recommendations of the Beverage Commission, it recommended that the policy of capacity tax might be suspended for some time. The report concluded that based on the average capacity utilised in the last two years as per the records made available to the Commission, the incidence of tax on capacity based regime is unfavourably impacting a local beverage manufacturer, making it less competitive as opposed to other producers of aerated water having international brands and attaining higher capacity utilisation.
If local manufacturer, in future does not achieve substantial increase in its capacity utilisation, the incidence of tax at enhanced tariff introduced in 2014 (vide S.R.O.140 (1)/2014 dated February 28, 2014) would make its aerated water operation highly uncompetitive.
However, the said legislation do provide a mechanism to avoid incidence of tax on the surplus/un-utilised capacity by way of invoking Rule 3(9) read with Rule 3(5) of SRO 649(l)/2013 dated July 09, 2013. This option may be considered appropriate subject to ascertainment of any associated cost for de-commissioning and re-commissioning of plant and other matters related thereto.
