Change in sales tax rates pushes sugar prices up 12.13%

KARACHI: The refined sugar prices witnessed an increase of Rs12/kg during a week due to the change in the sales tax rate on the sweetener.

The price of sugar/kg at the national level increased Rs12/kg to Rs110 by the week ended July 8, 2021, compared with Rs98.10/kg in the previous week, the Pakistan Bureau of Statistics (PBS) reported.

This shows the price of refined sugar witnessed an increase of 12.13 per cent in just a week. Market sources said the price of the commodity had registered an increase due to a change in the sales tax regime on refined sugar.

Surprisingly, the crackdown initiated against the sugar mafia in September 2020 pushed up the prices of the commodity instead of going down.

Meanwhile, the commodity witnessed an increase of 33 per cent year-on-year by the week ended July 8, 2021, as against Rs82.93 by the same week a year ago.

The Federal Board of Revenue (FBR) said the change in the sales tax regime, saying that currently, the price of white crystalline sugar was fixed at Rs60/kg in terms of SRO 812 (l)/2016, dated September 2, 2016, which is considerably below the actual market price of the commodity.

To address this anomaly, sugar has been included in the Third Schedule to the Sales Tax Act, 1990 so that the sales tax is charged and collected on actual retail price of the product at the manufacturing stage.

This measure would not only ensure due payment of taxes, but also help in putting a more effective price control mechanism in place for sugar.

Sources in the revenue board said the change in the sales tax regime had been applicable from July 1, 2021 and the hike in price cannot be attributed to the change in the sales tax regime.

They said the sales tax would be collected when mill-owners sell it to dealers, wholesalers or retailers. Currently, sugar is with the distributors, wholesalers and retailers and those were making unjustified profits by increasing its price, the sources said.

The sugar crushing would start in February-March next year and the mills would apply the change of sales tax rates that was brought through the Finance Act, 2021, the sources added.

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