In a major setback for the federal government’s revenue collection efforts ahead of the budget, the Federal Constitutional Court (FCC) declared the 4 percent additional tax imposed on poultry feed supplied to unregistered farms as illegal.
A two-member bench headed by Justice Aamer Farooq overturned an earlier ruling of the Lahore High Court and held that the additional tax could not be collected from poultry feed manufacturers supplying feed to unregistered poultry farms.
The dispute centered on Section 31A of the tax law, under which the additional tax was introduced through the Finance Act 2024.
The court observed that the provision contained ambiguity and could not be used to impose the levy on poultry feed supplies made to unregistered poultry farms.
According to the judgment, poultry farms are exempt from taxation under the relevant legal framework and, therefore, are not required to register for tax purposes.
The court noted that where the law grants such an exemption, neither poultry farms nor feed manufacturers can be penalized for the absence of registration.
FCC further held that the law provides complete protection to unregistered poultry farms and does not create any mandatory registration requirement. So imposing an additional tax on feed supplies to such farms was wrong.
Poultry feed mill owners had challenged the levy before the Constitutional court, arguing that the tax was being imposed despite the legal exemption available to poultry farms.
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