As the government has increased Federal Excise Duty on cement to Rs.100 per 50kg bag from Rs.75 in the budget 2019-20, the prices of cement bag are going to rise further from July in the range of Rs25-35 per 50kg bag.
Industry experts said that like other things, construction material is also going to get costlier after July when budgetary measures will start get implemented and new duties will be imposed. They said that the budget imposed 17 per cent sales tax on marble industry, besides increasing federal excise duty on cement from Rs1.5 per kg to Rs2 per kg, leading to overall increase of at least Rs.25 per 50kg bag of cement, besides effect of hike in fuel prices and higher customs duty on the import of coal.
They said that the tough times will get tougher due to new taxes and duties in budget. They said another increase in FED and changes, particularly the duty on coal, would wreck cement manufacturers and as a consequence consumers, which would in turn further shrink demand. They said that the government in previous budget had also exercised changes in the Federal Excise Duty (FED) mechanism from variable 5 percent of Marginal Retail Price (MRP) to a fixed Rs1.5/kg (Rs50 per bag).
This change not only increased existing FED on 50kg bag but also increased sales tax in absolute terms as sales tax was being calculated on top of FED earlier. Consequently, prices were increased by around Rs35-55 per bag due to previous budgets. In past budgets, the government had also increased customs duty on import of clinker from 2 percent to 11 percent, which was positive for local industry and discouraged clinker imports.
According to cement industry experts, the revenue shortfall gap of the FBR was planned to bridge through imposition of the new taxes of over Rs125 billion per annum though the cement companies have already been contributing more than 65 percent in annual GST collection in FY 2017-18.
They said that the GST gap is not very significant for last five years by the cement companies at compliance rate of almost 75 percent. Moreover the same companies are providing income tax of over Rs11.811 billion. They said that the FBR has now taken steps in the budget 2019-20 to materialize the target of revenue collection when it has to collect Rs5,550 billion in the financial year under the possible IMF program of $6 billion.
The industry stakeholders have strongly condemned the imposition of federal excise duty (FED) on cement in the budget for the Fiscal Year 2019-20. They further said that the Federal Board of Revenue has already imposed regulatory duty (RD) on steel, adding that the imposition of enhanced FED on cement would further affect the construction industry.
They said that a reduction in the Public Sector Development Program (PSDP) has already forced cement producers in the northern region to reduce prices by around Rs150 per bag. Earlier, cement prices in the north crossed Rs600 per bag and then began falling when the new government introduced austerity measures and slashed the development budget.