Karachi, May 18: The Pakistan Poultry Association (PPA) opposes the RGST on the poultry sector and withdrawal of exemption/zero rating on processed chicken; this was stated by Chairman Pakistan Poultry Association Mr. Khalil Sattar here at press conference today.

The Chairman, PPA said that the Government of Pakistan is contemplating to levy a 15% RGST on poultry feed while exempting chicken and eggs and withdrawing zero rating on processed branded chicken which would result in a levy of 15% GST.

He said that Poultry feed contributes 80% to the input cost. A 15% increase would undoubtedly increase the cost of Grandparents, Parent Stock, Broiler and Egg production operations. He stated that poultry product prices are truly demand and supply mechanism, as such the increase cannot be passed on to the consumers at will.

In the face of losses, he had no doubts that a large number of farms will close down and the prices of chicken meat could, in the face of short supply, increase by 100% from Rs. 175/Kg to Rs. 350/Kg. He emphasized that this phenomena of short supply and high prices was amply demonstrated as an aftermath of bird flu when the prices had soared more than 150%. In such a case, chicken will be produced only for the upper class of consumers.

He said that presently day old chicks are being sold at less than 1/3 the price and broilers are being sold at 20% below the cost, while eggs at 32% below the cost. RGST will be the final nail in the coffin.

The levy of GST on poultry feed is against all norms, principles and philosophy of the GST. If the output is exempted the input cannot be subject to GST, he justified.

The experiment of levying GST in the year 1996 resulted in a sharp decline of 45% in poultry production which resulted in a price spiral of not only chicken and eggs but also mutton and beef. The sales tax was consequently withdrawn by the Government in 1997 to put the poultry sector back on its rails.

He said that in order to keep the input cost low, the Government of India, Bangladesh, Thailand, Iran, China and even the very affluent countries in the EU, Australia, New Zealand,  and many states in the USA have either exempted or zero rated poultry feed, chicken and eggs as would be evident from the data annexed herewith.

The Chairman further emphasized that withdrawal of zero rating on processed, branded, value added chicken attracting 15% GST, would result in defeating the Government     ’s own policy of 2006 when the Ministry of Food, Agriculture & Livestock and Ministry of Commerce had launched a policy of encouraging value addition to attain qualitative and quantitative objectives and more importantly bringing about stabilization in poultry product prices to expand the production base for ultimate objective of exports.

He further informed that during 1976-2009, eight out of nine processing plants had closed down in the face of challenges from the unorganized street side slaughter. Thus, to provide a level playing field, the Government in 2008 announced zero rating of poultry processing, which encouraged setting up of two more processing plants. The levy will increase the price of skinless whole chicken by Rs. 31/Kg and boneless chicken by Rs. 51/Kg increasing the gap between the organized and unorganized sector, he added.

He said that chicken is in the reach of all class of consumers as was documented in the Household Integrated Economic Survey 2007-08 which showed that a consumer spending Rs. 4121 per month on food spends approximately Rs. 135 on poultry products, Rs. 110 on beef and only Rs. 15 on mutton. As such, the levy of GST will overburden all classes of consumers without any exception

The Chairman said in UK and rest of the EU even though the per capita income is above $30000 per annum and the need for revenue is extremely high, yet all food items including branded, processed, frozen, ready to cook, fully cooked, etc. are zero rated for VAT/sales tax. Even in the USA, many governments have exempted prepared food from the levy of VAT/sales tax.

He emphasized that processing plants were an essential requirement for food safety and security. The greatest danger in transporting of live birds to the markets and household was transmission and spread of viral and bacterial diseases endangering not only the poultry but human population as well.

In the recent outbreaks of Avian Influenza, number of countries had banned the sale of live birds and gave incentives and patronage to processing sector so that live birds gradually disappear from the markets. Since we currently process only 0.5% of the live birds the policy of encouragement needs to be continued.

The Chairman declared Poultry sector provides more than 1.5 million predominantly rural jobs for the socio economic uplift of the downtrodden rural populous. The result of GST imposition will spell out unemployment and bankruptcy of scores of medium and small farms.