Income Tax/Sales Tax/FED: FBR orders audit of sugar mills in line with SIC report

ISLAMABAD: The Federal Board of Revenue (FBR) has directed Chief Commissioners Inland Revenue to start audit of Income Tax/Sales Tax/Federal Excise Duty of all the sugar mills, and submit final reports by September 30, 2020. In this regard, the FBR has issued instructions to the field formations for audit of sugar mills in line with the recommendations of the Sugar Inquiry Commission (SIC) Report. The FBR has specified deadlines to the field formations including desk audit, identification of issues, legal proceedings and assessment orders within three months period.

The FBR has further directed its field offices to submit the final report by September 30, 2020, and also initiate legal proceedings against the units.

According to the FBR, it is pertinent to highlight that certain specific issues have been pointed out in the SIC Report pertaining to six sugar mills only.

These issues have already been communicated to the field formations concerned for taking legal actions. "Keeping in view sensitivity and importance of the issues, initiation of legal action in all sugar mills falling in your jurisdictions may be considered on priority and immediately with strict timelines."

The FBR has directed Chief Commissioners to undertake identification of issues of sugar mills through desk audit on June 30, 2020.

The FBR has given deadline of July 10, 2020 for selection of audit in Income Tax, Sales Tax and Federal Excise Duty related to sugar mills located under their jurisdictions.

The requisition of record will be sought till July 25, 2020 deadline.

In the next phase, the field formations will be tasked for preparation of audit reports till August 15, 2020. The issuance of audit reports will have a deadline of August 20, 2020.

The sugar mills will be given opportunity for reply and rebuttal till September 5, 2020. The assessment orders will be issued by September 20.

All field formations have been assigned to provide compliance report till September 30, 2020.

All field offices were instructed to strictly follow timelines for initiating legal action under their jurisdictions.

The fortnightly report will be furnished to the FBR's Member IR Operation on standard format on 15th or 30th of every month, the FBR added.

The Commission had held sugar millers responsible for evading billions of rupees tax, and recommended that the matter be referred to the FBR for recovery of due taxes.

"The matter needs to be referred to the FBR with the instructions to recover the sales tax evaded by the sugar mills during last one year on additional amount of ex-mill price exceeding the FBR threshold of Rs60 per kg. Further, the FBR should take steps to immediately start collecting sales tax on actual prevailing ex-mill rates instead of benchmark rates of Rs60 per kg" the SIC recommends to the FBR in its detailed report. The commission in its findings revealed that the increase in tax impact was Rs3.6 per kg due to the increase in rate of GST to 17 percent, after 14 July 2019. The real increase in the retail price occurred between December 2018 and June 2019, when it went up by about Rs16 per kg. Similarly, the major increase in ex-mill price occurred between December 2018 and June 2019, when it increased by almost Rs12 per kg, which is from Rs51.64 to Rs63.59 per kg. This period saw no increase in sales or other taxes and the price of sugarcane, the major input, was stable.

Copyright Business Recorder, 2020