Pakistan plans additional tax collection of 3.5 billion rupees on sugar sale


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

In the recent budget, the tax treatment of the sale of sugar was changed and the merchandise was reduced to the normal rate of retail sales tax, the sources said.

Previously, the sales tax on sugar was levied on a fixed value of Rs60 / kg. However, the price of the commodity has experienced a phenomenal increase over the past two years.

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

The price of sugar in the domestic market has reached around Rs 110 / kg during the current fiscal year; however, the price fell after the government imported large amounts of sugar.

Following the announcement of the 2021/22 federal budget, the price of the commodity saw another spike, which was attributed to the latest change in the sugar sales tax regime.

In the budget, sugar was listed in the Third Schedule of the Sales Tax Act, 1990, where the product will be charged at a normal sales tax of 17 percent based on its retail price.

An official from the Office of Large Taxpayers (LTO), Karachi, said sweets are responsible for collecting sales tax at the time of sale to distributors, wholesalers or retailers.
The official said the grinding season ended in March 2020, so sweets are not deducting sales tax at this time. Therefore, an increase in the price of sugar in the domestic market has been manipulated by traders or retailers and has nothing to do with the current implementation of the sales tax.

Total sugar sales tax collection was Rs 41 billion in 2019/20, compared to Rs 26.60 billion in the previous fiscal year.


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