950807

CED (Rs 180 m) on

ship plates to

cost Rs 1000m

to exchequer?

RECORDER REPORT

KARACHI: A committee appointed by the Central Board of Revenue (CBR) has completed its survey of the Gadani Shipbreaking Yard and assessed central excise duty on 550,000 tons of ship plate stocks at around Rs 180 million.

According to sources close to the industry, the government will only collect Rs 180 million on the existing stocks of ship plates, but as the imports of old vessels will drop due to the levy of CED to five percent, the state coffers will suffer a loss of as much as Rs 1,000 million over the year.

The survey, which has been completed on August 5, 1995, showed that the existing stocks of 550,000 tons may only yield Rs 180 million which included five to six vessels still to be dismantled. Sources further said the imposition of the CED since June 14, 1995 on the ship plates lying before the announcement of the Federal Budget, has pushed the industry in to hot water. Since then not a single ship has been imported and Letter of Credit for new purchases have been cancelled.

The retrospective imposition of CED has become the major deterrent for achieving the revenue collection target from the shipbreaking industry of Rs 3.5 billion during the current year 1995-96.

The levy will result in reduced imports of old vessels squeezing the government revenue to around Rs 2.5 billion as against the projection of Rs 3.5 billion. "The current year would witness a considerable decline in revenue as the industry has virtually come to a halt after the federal budget", said a shipbreaker.

Sources maintained that due to decline in arrival of old vessels, the Balochistan government will also suffer because the shipbreaking industry paid Rs 100 million to Balochistan Development Authority, nearly Rs 4 million to Balochistan Town Committee and over Rs 75 million to KMC in the shape of octroi.

At present there are 25 shipbreaking yards in operation with a total workforce of around 20,000. But since the decision of the government to levy CED, work at Gadani is at a standstill and several shipbreakers have started laying off their labour.

These shipbreakers complain they are in financial straits with heavy loans outstanding against them and if the remedial measures are not taken soon the number of defaulters may grow.

A shipbreaker said, melters are our "arch rivals" who employ a strong lobby against them. With the levy of CED on ship plates, the re-rolling industry has also been on brink of collapse. Several mill owners have sent SOS signals to the government and have also served notices of closures to Sales Tax and Excise Department.

Meanwhile, Mian Ejaz Shafi, Member, National Assembly, has demanded withdrawal of five percent excise duty on ship plates. He said that the industry has a strong case for withdrawal of levy of duty which is flagrant instance of multiple taxation. Duty is levied at the stage of shipbreaking, thereafter duty is again levied, when these goods go to the re-rolling mills and finally when the products go to the end-user.