ISLAMABAD: The federal government decided to exempt cottonseed from 5 percent sales tax in line with a recommendation given by the Ministry of National Food Security and Research.
The matter is subject to final approval by the Economic Coordination Committee (ECC) of the cabinet. According to the media report, the Ministry of National Food Security has prepared a summary for presentation in an ECC meeting and its copy has also been forwarded to the Ministry of Industries, Ministry of Finance and Federal Board of Revenue (FBR).
About 1,200 ginning factories are currently in the business of extracting lint from cottonseed, which is also utilised by 6,000 edible oil factories. Pakistan’s annual cotton produce yields about 4 million tons of cottonseed, from which about 400,000 tons of edible oil is produced, which constitutes about 60-70% of the total edible oil produced in the country.
The government had imposed a 5% sales tax on cottonseed. On the other hand, cottonseed cake, used as livestock feed, is exempt from the sales tax.
According to Annexure-I of the Sales Tax Act 1990, the feed for cattle including sunflower seeds and canola is exempt from sales tax. Owing to the tax exemption, cattle farmers and other growers in Pakistan are increasingly using cottonseed for livestock feed, instead of utilising the seed in edible oil production, says the media report.
Consequently, the production of edible oil is going down. This poses a risk for the country because it will be required to import edible oil in huge quantities in the near future, which will put pressure on the country’s foreign exchange reserves.
