Traceability in the cement industry in Pakistan

Pakistan has reportedly implemented track and trace as directed by the Federal Tax Board (FBR).

Since July 1, 2022, FBR has been working towards the implementation of T & & in the cement industry with the assistance of its licensee, Authentix Inc. Of the United States, and consortium partners AJCL Private Limited and MITAS Corporation of South Africa. T solution.

The Commission has successfully implemented the system in the tobacco industry and is in the process of making it fully applicable to the fertilizer industry.

Why do we need a T & T system?

Manufacturers often understate their production to evade taxes, and this is where the problem begins. For example, suppose a cement manufacturer produces 500 bags, and the demand for cement in the factory is 400 bags. Now if 500 bags are produced, it means that the supply exceeds the demand, which leads to a drop in price. The problem for manufacturers is that the government will levy a tax on every bag purchased. So instead of reporting this extra 100 bags, the producer will indicate that they are producing 400 bags and selling the remaining 100 bags at the lower duty-free price. & nbsp;

Manufacturers understate their production. They then sell the unreported surplus outside the tax net at a cheaper price, and the black market grows. This has led to startling estimates of the size of Pakistan's shadow economy, with academics and researchers estimating the size of this undocumented economy to be between 40-80% of the country's GDP.

Of course, if you are able to underreport to control prices, you are also more likely to underreport to evade taxes. Often, underreporting is more pronounced than in the above example, and not just in the cement industry. & nbsp;

What is the T & & T System?

The T & T system recommends direct taxation at source. This means that the government monitors production and classifies the output of companies, and then taxes them directly on these figures. So if we go back to the example of cement, when the government first introduced the T & T system, it was going to require the cement industry to invest heavily in a mechanism to put a stamp on every bag of cement produced, which could then be scanned before it was sold. The

scan data will be sent directly to FBR, which will record the total number of bags produced and tax accordingly. T & T solutions are used worldwide to assist in the tax collection process.

Implementation and impact

According to sources, there have been a number of successful demonstrations at various plants to demonstrate the performance of the tracking system, but there have been delays at cement manufacturers.

It is reported that the tax authorities have given the powerful cement manufacturers a deadline to implement the tracking system from August 18, 2023. Nearly 70% of the operating cement plants are located in the northern region and the remaining 30% of the capacity is located in the southern region.

According to the All Pakistan Cement Manufacturers Association, the capacity of the cement industry has soared to about 83.1 million tonnes.

At present, in addition to the 11% income tax levied on cement manufacturers, finished cement products are subject to 20% tariff, 6% additional tariff, 2 rupees (equivalent to about 0.05 yuan)/kg FED and 18% sales tax.

Generally speaking, the cement industry is organized and oligopolistic in nature, with a market value of about 378 billion rupees (equivalent to about 9.3 billion yuan) in March 2023. In fiscal year

2022, the total revenue of the whole industry increased by 24% to 671 billion rupees (about 16.5 billion yuan). According to the research of a local institution, the cement industry achieved a gross profit of 72 billion rupees (equivalent to about 1.77 billion yuan) and a pre-tax profit of 49.7 billion rupees (equivalent to about 1.22 billion yuan) in the first half of fiscal year 23.

Meanwhile, the per capita consumption of cement in Pakistan is about 215 kg, while the per capita consumption of cement in the world is about 550 kg, which is more than twice the per capita consumption in Pakistan, reflecting the huge growth potential of cement demand.

In its last report, the IMF also announced that the roll-out of track and trace was essential to ensure the full benefit of recent tax changes, particularly the Federal Reserve's tax changes on cigarettes.

In a recent report, a local NGO highlighted that FBR's tracking system is showing positive results. For the first time, the digital solution effectively limits illicit trade in the tobacco industry to less than 15%.

Track and Trace's real-time production monitoring capabilities revolutionize the traditional retrospective audit approach.

Real-time production monitoring will enable tax authorities to access up-to-date, comprehensive data, facilitating proactive decision-making and ensuring more accurate tax assessments. This centralized repository will provide the tax authorities with unprecedented visibility into the state of production in the industry. The implementation of the

track and trace system will not only cover the sectors in the track and trace network, but will also expand the tax collection and thus contribute to the state finances.

Attention: On September 12-13, 2023, China Cement Network will hold the "2023 Cement'Double Carbon 'Conference and the 10th China Cement Energy Conservation and Environmental Protection Technology Exchange Conference" in Zhengzhou, Henan Province. The cement industry is moving towards a low-carbon, more energy-saving and greener high-quality development.  

At the same time, the medal ceremony of "2023 Advanced Enterprises of Double Carbon in Cement Industry" and the "Double Carbon" Equipment Exhibition will be held. After the meeting, we will also organize a visit to Jiyuan Zhonglian Cement Co., Ltd. "The world's first production line of carbon sequestration auxiliary cementitious materials and low-carbon cement from flue gas CO2 of steel slag capture cement kiln".