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Confusion over cooking oil prices

There is confusion over when the exemption of Value Added Tax (VAT) on cooking oil becomes effective.

While some manufacturers have gone ahead to reduce prices of cooking oil in anticipation of the change, some insist that they will wait until the bill is gazetted before proceeding.

This has caused discrepancies on the prices of cooking oil with those yet to effect the removal complaining that they are losing business to those who have gone ahead to remove the 16.5 percent VAT on the commodity.

During the last sitting of Parliament, Minister of Finance, Goodall Gondwe, announced the removal of VAT on cooking oil.

One of the manufacturers, ETG Parrogate Cotton Limited Operations in Charge, Rajneesh Dabral, said the current situation is unfavourable to businesses that are waiting to hear from the Malawi Revenue Authority (MRA).

“Our friends have already removed the VAT making their products cheaper than ours. In view of this, we will also remove the VAT by August 1, so that we remain competitive on the market,” Dabral said.

He further said according to law, whenever there are changes in custom or excise duty, companies receive communication from the tax collecting body to start implementing the new law.

“The picture being portrayed out there by our consumers is that we are stealing from them by not reducing the prices of our products,” he said.

Another manufacturer, who opted for anonymity, concurred with Dabral, saying that to level the playing field, all manufacturers will remove the VAT by August 1.

The manufacturer said so far, they have lost some big orders because the prices of their products are higher than others.

“We are being put out of business just because we want to follow what the law says and this is not fair. It’s either we all have to apply the VAT or remove it and the best we can do is remove the VAT.

“For sometime, we have been complaining of smugglers putting us out of business because of uncompetitive prices they were offering, now it is our fellow local manufacturers that we are competing against and are putting us out of business,” complained the manufacturer.

However, MRA Publicist, Steve Kapoloma, said the situation is difficult because once the bill is passed by Parliament it goes through a number of processes before it is implemented.

“The situation we are in is almost similar to the water case whereby Parliament passed the bill to add VAT on piped water, but the implementation started much later in October if not November,” Kapoloma said.

He further said it is difficult for MRA to act, since on paper the law is there, but in a situation whereby, the President does not assent to the bill, then a penalty will be applied to those companies which have already removed the VAT at the moment.

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