Most polypropylene bag manufacturers evade GST

LAHORE: It is inexplicable that out of 515 polypropylene bags manufacturing companies registered with the Federal Board of Revenue, less than 80 pay sales taxes.
Data available with Pakistan Today revealed that the FBR collected Rs 74.28 million of sales tax in the year 2009-10, which was Rs 14.95 million greater than the collection of Rs 59.33 million in 2008-09.
However, augmentation of tax revenue was a result of larger collections from companies which are already tax payers, whereas, virtually no tax was collected from companies which had opted not to pay tax.
Polypropylene bags are used in every sector including cement, flour, sugar and rice. The industry has grown rapidly, however increase in tax collection has almost been zero.
The highest tax worth Rs 26.13 million and Rs 24.43 million was collected form Islamabad based two companies Nova Synpac and Syntronics respectively. Consequently, 68 percent of sales tax in polypropylene bags has been paid by Islamabad. Both companies had paid Rs 22.95 million and Rs 13.06 million respectively in 2008-09 while this year, tax collection increased 13.8 and 87.1 percent respectively.
Only 10 factories exist in Islamabad, out of which six pay tax. However, over a dozen factories are present in Lahore, Karachi, Peshawar, Faisalabad, Gujranwala, Hyderabad and Abbottabad. Regrettably, merely a few pay tax.
“The rest of the regions pay only 32 percent sales tax in polypropylene and it seems that only factories from Islamabad are earning profits and pay tax while the residual are in deficit,” said sources adding that the government should keep a check on factory profits for collection of sales tax.
It is pertinent to note that a company, which is all set to establish a plant to produce cement sack at the cost of over one billion rupees in the Sunder Industrial Estate is one of largest tax evader in Lahore region, said the sources, adding that the company paid a meager Rs 18,000 in 2008-09 while it did not pay a single penny in 2009-10.
Interestingly, the biggest industrial sectors like Lahore and Karachi are far behind. Gujranwala is also considered a hub of plastic industry in Pakistan as around 50 units operate in the region. However, only four pay tax while the rest are in losses.
The internationally community has severely criticised Pakistan for low revenue generation in the form of taxes. It is estimated that approximately Rs 800 billion of tax is evaded in a single year only due to corruption of various departments.
The plastic industry has exhibited a splendid growth in Pakistan in the last 10 years due to existence of a large consumer market. The government has already banned import of used plastic material from other countries to encourage the local industry.
However, unfortunately the local industry has not acted responsibly, said an industrialist, adding that the government should keep a check on its tax collection mechanism so that tax evaders could be reduced.