Wednesday, May 23, 2012

VAT for Corn Deep-processing Industry Raised to 17%

On 17 April, 2012, the State Administration of Taxation (SAT) published a notice that value added tax (VAT) for corn deep-processing industry shall be raised from 13% to 17% and the notice has been put into effect since 1 May, 2012, according to CCM International’s May issue of Corn Products China News.
SAT stated that corn embryo belongs to primary agricultural products as admitted in Expanatory Notes on the Scope of Agricultural Products Subject to Taxation and should be levied 13% VAT according to the current VAT policy in China. However, corn syrup, maize peel, corn fibre and corn gluten meal belong to neither primary agricultural products nor duty-free feed as stated in Notice about Exempting Feed Products from VAT of the State Administration of Taxation and should be taxed 17% VAT. Actually, VAT for the whole corn deep-processing industry was 13% before the notice was implemented. 

The purpose of the notice was to inhibit corn deep-processing industry developing too fast to adjust the price of corn. At the beginning of 2012, National Development and Reform Committee and the State Administration of Grain sent a joint investigation group to research corn market in Northeast China and found that it was corn deep-processing industry, the second largest consumption field of corn, that pushed the increase of corn's price. In recent years, the fast development of corn deep-processing industry has driven up the price of corn once and again, hurting the interest of animal raisers because corn is mainly used for feed. In middle April, 2012, the price rate of live pig against corn has fallen below 6:1, meaning that pig raisers would suffer a USD15.9 (RMB100) loss for each pig. In order to protect the interest of pig raisers and guarantee normal supply of pork, it is necessary to prevent the price of corn increasing too much. As a matter of fact, corn consumption proportion in corn deep-processing industry was as high as about 28% in 2011, over 26%, the upper limit as allowed in Guidance on Promoting the Healthy Development of Corn Deep-processing Industry published in 2007. To be noticeable, some products of corn deep-processing industry such as sodium glutamate and citric acid are in trouble on account of their over-capacity. Thus, raising VAT for corn deep-processing industry helps to eliminate small producers with high cost and promote healthy development of the industry in the long term.

Besides, Chinese government has launched some other policies to adjust the price of corn and inhibit corn deep-processing industry developing too fast. For example, the Ministry of Finance issued Notice on the Adjustment of the Financial Subsidy of Bio-fuel Ethanol on 17 April 2012, which indicated that the subsidy for bio-fuel ethanol (a corn deep-processing product) using grain as raw material has been reduced from USD194.6/t to USD79.4/t while the subsidy for that using non-grain as raw material is USD119/t. It is reported the capacity of bio-fuel ethanol was 1,500,000/t in China and needed 5 million tonnes of corn as raw material, over 11% of the total consumption in corn deep-processing industry, in 2010. 
Generally, 2012 will be a tough year for corn deep-processing producers. Some small enterprises with inferior technologies and high cost will be eliminated and corn consumption in corn deep-processing industry will be limited. Recently, the Ministry of Industry and Information Technology of the People's Republic of China published a notice that the elimination target in corn deep-processing industry is 640,000t/a of ethanol, 143,000t/a of sodium glutamate and 70,000t/a of citric acid in 2012.
However, if any new corn species with higher unit yield are developed, it will be easier for both animal raisers and corn deep-processing producers because of possibly increasing supply of corn.

Source: Corn Product China News 1205

Content of Corn Products China News 1205:
Argentina can export corn to China after 20 April, 2012
North China Pharmaceutical makes an operating profit loss in 2011
Angel Yeast's net profit decreases 16.48% in Q1 2012
Corn starch and starch sugar encumber Longlive Bio-technology in Q1 2012
Domestic exportation of citric acid not performs well in 2011
Chinese corn products Imp. & Exp. analysis in March 2012
Domestic furfural suffers low price in May 2012
Corn starch suffers low transaction volume in its “busy season”
Xiwang Sugar performs a bit badly in Q1 2012
Northeast Pharmaceutical suffers a net profit loss of USD12.4 million in Q1 2012
Diversified product mix makes Baolingbao keep good performance
… …

Corn Products China News, a monthly publication issued by CCM International on 20th of every month, reveals the driving force of news stories and deeply analyzes the influence of trends and dynamics on domestic and international corn deep processing industry.

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