TAHIR AMIN
ISLAMABAD (July 02 2010): The prices of a
large number of consumer items rose
substantially effective July 1 (Thursday)
which can not be accounted for by the first
day of implementation of a one percent
increase in sales tax as declared in the
budget 2010-11. According to the Finance
Act, 2010, the standard rate of sales tax
has been increased from 16 to 17 percent
from July 1, 2010. In most cases, the prices
were increased before the enforcement of the
Finance Act, 2010 from July 1.
A market survey conducted by this scribe on
Thursday revealed that prices of different
items including packed juice, cigarettes,
packed milk, mineral water, electronic
products such as air conditioners/deep
freezers increased manifold in the twin
cities of Rawalpindi and Islamabad. The
price of fabrics rose by about 5 to 7
percent - a rise that shopkeepers attributed
to increase in sales tax, electricity and
gas prices coupled with energy crisis. It
was observed that the price of these items
had increased under the cover of sales tax
even before the legal implementation of the
Finance Act, 2010 on July 1.
The survey of cloth market revealed a large
number of un-registered retailers. The
average quality of suit which was available
at Rs 500 before the budget is now available
at Rs 550 to Rs 580 witnessing an increase
of Rs 50 to Rs 80. However, price of a good
quality suit, starting from Rs 1000 to Rs
1500 registered an increase of Rs 100 to 150
per suit. Most of the cloth retailers linked
an increase in the price of their product
with the increase of one percent in sales
tax. Ironically most of these retailers
surveyed were not registered with the sales
tax department. Thus the burden of sales tax
has been passed on to the consumers by
retailers who are operating out of the tax
net and thus are not depositing the tax in
the national exchequer.
Price of packed fruit juice has been raised
from Rs 22 to Rs 26. Similarly, price of
mineral water has also witnessed an increase
of Rs 1-2 and price of various brands of
cigarettes has been substantially raised
following an upward revision of excise duty
on cigarettes. In case of air
conditioners/deep freezers, there is an
approximate increase of Rs 4,000 to Rs 5,000
per item due to imposition of 10 percent
excise duty on these items.
There is no check on un-documented
retailers, and their argument for raising
prices is that the entire supply chain
including wholesalers and dealers have
increased the price of items due to increase
in sales tax.
When contacted, a tax practitioner said that
the manufacturers usually take 15-20 days to
raise prices of finished products following
an increase in sales tax. Thus there is no
justification for the retail and wholesale
outlets to increase rates at this time, he
argued, other than to make windfall profits.
Tax analysts pointed out that the retailers
and wholesalers are already resisting
installation of the free of cost "Electronic
Tax Registers" at retail outlets.
There is a strong apprehension among the
retailers that the actual turnover and sales
would be recorded through the "Electronic
Tax Registers". Thus, installation of such
"Electronic Tax Registers" have been out
rightly rejected by the retailers as that
would lead to documentation of their
business transactions, experts added.
Most of the retailers and shopkeepers
surveyed stated that un-cleared stocks will
be sold at old prices without incorporating
one percent increase in sales tax. However,
prices will be revised upward as soon as new
supply is made available in the market, they
claimed. This scribe found this claim
erroneous as most of the outlets had passed
on the burden of one percent increase in
sales tax to consumers.
Copyright Business Recorder, 2010
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