Pakistan FBR proposes 10% excise duty rise on cosmetics

By Michelle Yeomans contact

- Last updated on GMT

Pakistan FBR proposes 10% excise duty rise on cosmetics

Related tags: Medicine

The Federal Board of Revenue has proposed a 10% Federal Excise Duty (FED) on cosmetics, paints and varnishes in its 2014/15 budget.

According to new FBR budget proposals, a new excise duty on lubricating oils is to be introduced with a proposed levy on skin care products at 10% of the retail price to ultimately generate additional revenue.

The news comes just a year after the duty was removed from the likes of lubricating oils and skin care products.

Previously, the Board considered the federal excise imposed on several items, but due to policy of previous government it was withdrawn. According to analysts, this was unnecessary and has neither encouraged the industry nor benefited the revenue.

In fact, back in 2011/12, the FBR abolished the duty on 15 items and moved to abolish it on another 10 items last year.

The previous government had been eliminating the duty in a bid to gradually reduce the number of income and sales taxes to simplify the system and reduce the cost of doing business.

As it stands, this most recent proposal, if taken on, will be in the Pakistan Muslim League-Nawaz government and is poised to generate billions of rupees next year.

Excise duties on cosmetics the rise in Asia...

The Supreme Court in New Delhi recently implemented a "cure or care" differentiation to separate medicinal products from cosmetics in a bid to avoid confusion as to when suppliers will need to pay a levy of central excise duties. 

According to government officials, the decision to implement the rule is to establish whether a product is being classified rightly as a cosmetic or medicament, as cosmetic suppliers are taxed an central excise duty of 15%.

Referring then to the Central Excise Act, news publication on the region, the Times of India flagged up that the bench found preparations for skin care or colour cosmetics were those to be classified as cosmetics and that medicinal preparations used to treat certain skin complaints should also be categorized as medicaments.

In the country, cosmetic products are described as enhancing or improving a person's appearance or beauty, whereas medicinal products are used to treat or cure some medical condition.

According to official Justice Joseph; "If a product comprises of two or more constituents mixed or compounded together for therapeutic or prophylactic use, the same is to be covered under medicament."

Related topics: Business & Financial, South East Asia

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