ISLAMABAD: The Federal Tax Ombudsman (FTO) has approached the Federal Board of Revenue (FBR) for speedy implementation of the "Sugar Commission Report" and recommended establishment of dedicated tax units in field formations to check tax evasion and action against fake and 'benamidars' buyers in the sugar sector.
According to budget proposals of FTO office for 2021-22 submitted to the FBR, the report of the Commission of inquiry constituted by the government to probe into the increase in sugar prices, indicated that after change in law in 2005, FBR officials had no powers of inspection and they simply relied on data provided to them by the sugar mills management.
In order to safeguard the government revenue, FBR should implement the relevant recommendations of "Sugar Prices Inquiry Commission" by creating dedicated units at respective field formations. It should also expedite arrangements for electronic monitoring of activities of major revenue generating units/industries, FTO further recommended.
The Commission also observed that fake and 'benamidars' buyers of sugar worth billions of rupees were reported to FBR by the mills' management in their monthly sales tax returns. The Commission recommended that FBR should initiate appropriate actions to rectify this situation and take action against benami buyers as per law, FTO recommended.
The "Sugar Commission Report" revealed that the FBR deputed its officials under the relevant provision of the Sales Tax Act, 1990 to monitor the affairs of sugar Mills related to the sales tax whose duties are to monitor production and sales on a 24/7 basis, in the premises of the Sugar Mills. FBR also scrutinizes monthly sales tax returns and purchase declarations submitted by the mills and prepare a comparison of the sales record of the mills with the FBR Data / Returns filed by the company.
During visits of the sugar Mills by the Inquiry Commission teams, it was observed that officials of FBR deputed in the sugar Mills were silent spectators. The FBR officials said that after the change in law in 2005, the powers of the inspection and supervisory functions were curtailed and therefore, they simply rely on the data provided to them by the sugar mills management.
It is Interesting to note that the mills' managements had reported the same data on the same format to FBR through electronic medium on a daily basis to the concerned LTU/RTO. The total production and total sales of the sugar mills is, therefore, misrepresented which means that 'off-the-books" activity goes unreported. Unaccounted for sales translate into tax losses of billions of rupees to the national exchequer.
The Commission also observed that fake buyers and benamidars of sugar worth billions of rupees were reported to FBR by the mills' management In their monthly sales tax returns. FBR has started taking actions by issuing notices to the fake buyers but still a lot remains to be done.
The Commission has also unearthed the fictitious benamidars sales and the recommendations have been made in section on benamidars for taking action against such transactions by the mills. FBR should initiate action to identify such brokers/dealers and investors and take action against them as per law. The capacity of the department to meet this challenge need to be reassessed and enhanced accordingly, the report added.
Copyright Business Recorder, 2021