SC determines right meaning of FMCG products
The judgment, authored by Muhammad Shafi Siddiqui, said that the FMCG are those which are supplied in retail market as per 'their' daily demand. 'These are not directly considered as consumer items, but form a key component for many consumer products. It is meant primarily for an industrial/ commercial use,' it added.
These goods in their form, as described in the orders of Appellate Tribunal Inland Revenue, Peshawar, and the Peshawar High Court (PHC), are not utilisable predominantly by the end consumers.
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The respondent, an individual taxpayer (M/s Sufi Tahir Nadeem), derived income from distribution (per orders) of (i) Bopp Composite/ Plain Film, (ii) Pet Film, (iii) CPP Metalized Film, and (iv) CPP Milky Film.
He filed returns for the tax years 2015 to 2017. On examination by the department, that the tax liability on the respondent-taxpayer on the basis of turnover declared by him, was not proper, the return for the tax year 2015 was selected for audit under Section 177 of the Income Tax Ordinance, 2001 and the deemed assessment was accordingly amended under Section 122(1) of the Ordinance by the officer Inland Revenue creating tax liability under Section 113 of the Ordinance on the basis of declared turnover.
The declared position for the tax years 2016 and 2017 was the same; consequently, the Additional Commissioner Inland Revenue invoked Section 122(5A) of the Ordinance and created tax liability under section 113 of the Ordinance on the basis of turnover declared by the respondent-taxpayer.
Aggrieved of it, the respondent-taxpayer filed appeal against the amended order and took the plea before the appellate authority that he was dealing in distribution of Fast Moving Consumer Goods (FMCG), which were subjected to tax rate of 0.2 per cent (minimum tax) as per Division IX, Part-IV of First Schedule to the Income Tax Ordinance, 2001, instead of 1 per cent (minimum tax) rate applied by the Assessing Officer.
The Commissioner Inland Revenue rejected the stance of the taxpayer, who then approached the Appellate Tribunal Inland Revenue, Peshawar. The Tribunal annulled the order of the authority as a consequence the Commissioner Inland Revenue (petitioner) filed Tax References before the PHC, which were dismissed and the questions of law were answered in negative against the department and in favour of the taxpayer. The department then filed an appeal before the apex court.
The question before the Court was whether subject goods could be considered as 'consumer goods' for end consumers and stand-alone constitutes consumer goods within the frame of Clause 22A read with (13AB) of Section 2 of the Ordinance.
Section 2(22A) describes the 'fast moving consumer goods' which means the consumer goods which are supplied in 'retail market as per daily demand of a consumer' (excluding durable goods). The bracketed insertion was provided to the Statute via Finance Act, 2017.
The judgment noted that the consumer goods are those as defined in (13AB) of section 2 of the Ordinance; i.e., 'consumer goods means goods that are consumed by the end consumer rather than used in the production of another good.'
Justice Shafi Siddiqui wrote that it was imperative for the Tribunal and the High Court to have adjudged whether the goods by law were FMCG and are meant for 'direct consumption' by the end consumer rather than used in the production of another good(s) in its finished form; as only then this could have been applied for any benefit to the taxpayer.
These products (Bopp Composite/Plain Film, Pet Film, CPP Metalized Film and CPP Milky Film) are primarily used as a material for packing other products for various consumer goods and are not typically sold directly to consumers as a stand-alone product.
The consumer may buy products packed in such films but would not typically purchase the goods.
Copyright Business Recorder, 2025
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