In a noteworthy move affecting the development division, the government has expanded the withholding tax on cement to 2.5% for non-filers, as detailed on July 31. This decision is part of a broader set of new tax regulations that also include an increase in sales tax. Consequently, these changes have driven up the cost of cement bags by PKR 200-250, placing an impressive financial burden on both consumers and dealers.
Under the new pricing, the cost of A-grade cement bags has surged to PKR 1500, while other brands are now priced between PKR 1400 and PKR 1470. This significant hike has not only affected the market dynamics but also raised the construction costs, thereby impacting ongoing and planned infrastructure projects across the country.
Current Cement Prices by Brand
Here’s a detailed breakdown of the current cement prices by brand:
- Bestway Cement: PKR 1,550 – PKR 1,600
- Lucky Cement: PKR 1,540 – PKR 1,550
- DG Khan Cement: PKR 1,510 – PKR 1,550
- Fauji Cement: PKR 1,450 – PKR 1,560
- Kohat Cement: PKR 1,450 – PKR 1,525
- Askari Cement: PKR 1,540 – PKR 1,550
- Cherat Cement: PKR 1,455 – PKR 1,465
- Maple Leaf Cement: PKR 1,500 – PKR 1,510
- Power Cement: PKR 1,450 – PKR 1,460
- Pioneer Cement: PKR 1,455 – PKR 1,465
Impact on Cement Merchants and Construction Industry
These price adjustments have sparked significant discontent among cement merchants, who are now bearing the brunt of these regulatory changes. The increase in Federal Excise Duty from PKR 2 to PKR 4 per kg has further exacerbated the situation. As a result, the All-Pakistan Cement Merchants Association has initiated an indefinite nationwide strike in protest against these tax hikes.
The merchants are advocating for a shift to a presumptive tax regime, which they argue would prevent business closures and job losses. They contend that the current tax system is unsustainable and poses a significant threat to their operations. Moreover, the requirement for Point of Sale (PoS) machines under the new regulations has added another layer of complexity. Many merchants, especially small and medium-sized businesses, are struggling to meet this requirement due to the prohibitive costs associated with these machines.
The Broader Economic Implications
The strike by the cement merchants is a coordinated response to what they see as an unsustainable tax burden that not only increases operational costs but threatens their survival. The All-Pakistan Cement Merchants Association’s call for a feasible tax regime underscores the need for a more simplified and business-friendly tax policy that supports the sector rather than stifles it.
In light of these developments, the construction industry, which is a major contributor to the national economy, is bracing for a period of uncertainty. The increase in cement prices is likely to lead to higher construction costs, potentially slowing down projects and affecting the overall growth of the sector. This, in turn, could have a ripple effect on related industries and the broader economy.
Government’s Perspective and the Way Forward
The government’s decision to raise the withholding tax and other related levies comes at a time when the nation is already grappling with economic challenges. While the aim might be to increase revenue, the approach has sparked considerable resistance from key stakeholders within the industry.
As the situation unfolds, there is a critical need for dialogue between the government and the cement merchants to find a middle ground that addresses the concerns of both parties. A balanced approach that ensures fair taxation while supporting business sustainability is vital for the long-term health of the construction sector and the economy at large.
Conclusion
The increase in withholding taxes on cement and the subsequent price hikes have triggered a significant backlash from cement merchants, culminating in a nationwide strike. The construction industry now faces a challenging period, with potential implications for project costs and timelines. Moving forward, constructive engagement between the government and industry stakeholders will be essential to navigating these challenges and fostering a more robust regulatory environment.
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