BOL EXCLUSIVE: Pakistan plans additional Rs3.5 billion tax collection on sugar sale

KARACHI: The Federal Board of Revenue (FBR) has estimated collection of an additional amount of Rs3.5 billion following change in the sales tax regime on the supply of sugar, official sources said on Wednesday.

In the recent budget, the tax treatment on the sale of sugar had been changed and the commodity has been brought under the normal sales tax rate on a retail basis, the sources said.

Previously, the sales tax on sugar was levied on fixed value of Rs60/kg. However, the price of the commodity witnessed a phenomenal increase in the last couple of years.

The sources said the abnormal trend of sugar supplies in the domestic market caused immense revenue loss to the national exchequer, adding that in some cases, the ex-mill price of sugar was recorded at Rs95/kg but the Federal Board of Revenue (FBR) continued to collect sales tax at Rs60/kg.

The sugar price in the domestic market hit around Rs110/kg during the current fiscal year; however, the price came down after the government imported bulk quantities of sugar.

After the announcement of the Federal Budget 2021/22, the price of the commodity witnessed another surge, which was attributed to the latest change in the sales tax regime for sugar sale.

In the budget, sugar has been brought into the Third Schedule of the Sales Tax Act, 1990 where the commodity will be charged at a normal sales tax of 17 per cent on the basis of its retail price.

An official at the Large Taxpayers Office (LTO), Karachi, said the sugar mills have been made responsible for the collection of the sales tax at the time of sale to distributors, wholesalers or retailers.
The official said the crushing season ended in March 2020 so the sugar mills were not deducting sales tax, at present. Therefore, an increase in the sugar price in the domestic market was manipulated by dealers or retailers and has nothing to do with the present implementation of the sales tax.

The total sales tax collection on sugar stood at Rs41 billion in 2019/20, compared with Rs26.60 billion in the preceding fiscal year.

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