Pakistan Budget Review 2018 – 19 and Impact on Palm Oil
The fiscal budget for 2018 – 19 was announced on April 27, 2018 which aims to bring more people under the tax net and increase the government’s earnings considerably. The government has set the fiscal year growth target at 6.2% against the target of 6% set for the current year. Government also announced 2 amnesty schemes a few weeks ago allowing people to declare assets within and outside the country at nominal tax rates of 2% to 5%. This measure is aimed at allowing people to bring most of their assets to Pakistan and increase the size of the economy.
The Chairmen of Pakistan Vanaspati Manufacturers Association (PVMA) and All Pakistan Solvent Extractors Association (APSEA) issued a joint letter to the Federal Bureau of Revenue suggesting not to change the existing duty structure on the import of oils and fats in the country as it provides a level playing field for all commodities. (Letter attached)
Following is the revised duty structure for the fiscal year 2018 – 19 with changes marked in red:
|HS Codes||Particulars||Custom Duty
PKR / MT
2017 – 18
PKR / MT
2018 – 19
|1511.9020||RBD Palm Oil||9,180||9,180|
|1511.9030||RBD Palm Olein||7,692||7,692|
|1511.1000||Crude Palm Oil||6,800||6,800|
|1511.9010||RBD Palm Stearin||7,692||7,692|
|1513.2100||Crude Palm Kernel||7,692||7,692|
|1507.1000||CD Soybean Oil||9,050||12,000|
|1804.0000||Cocoa Butter Substitute||10,800||10,800|
|1||PODB Cess Fund||PKR 50/MT||PKR 50/MT|
|2||Additional Custom Duty||1%||2%|
|2||Sales Tax / Central Excise Duty||16%||16%|
|3||Advance Income Tax||5.5%||5.5%|
|4||Federal Excise Duty||PKR 1000/MT||PKR 1000/MT|
|Conversion US$ 01 = PKR 116|
The government has however, increased the duty on import of CD soybean oil from existing PKR 9,050 PMT to PKR 12,000 PMT. According to government sources, this increase in the duty is aimed to protect locally produced soft oils. PVMA, in their earlier budget proposal had requested the government to increase the duty on the import of soybeans as it enjoys a lower duty as compared to imported edible oils.
The government has also increased the additional custom duty from 1% to 2% on import of all oils and fats across the board.
Impact of Increase in Soybean Oil Duty on Import of Palm Oil
The increase in the import duty of soybean oil will not have any impact on the import of palm oil as both oils are catering to completely different market segments. Palm oil imported in Pakistan is mainly used to manufacture vanaspati and is also a major feedstock of the food industry. However, the soybean oil imported in Pakistan is being used to cater to the soft oil market and is directly competing with locally produced soft oils.
The import of soybean oil in 2017 amounted to 221,150 MT which was 6.9% of the total import of oils and fats.
Following is the table of oils and fats import in 2017:
|Commodity||Jan – Dec 2016
|Jan – Dec 2017
|Crude Palm Oil||115,348||121,815||6,466||5.61|
Source: Shipping Agents’ Vessel Report
Financial Impact of Change in Duties
Based on the current commodity prices, the increase of PKR 3,000 PMT in the import duty of soybean oil and 1% increase in the additional custom duty would have the following additional financial cost on imports of the major edible oils in Pakistan:
Commodity Additional Cost
CD soybean oil USD 41.18 per MT
RBD palm oil USD 8.12 per MT
RBD palm olein USD 8.25 per MT