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ISLAMABAD: President Dr Arif Alvi has directed the Federal Board of Revenue (FBR) to bring into the tax net the unregistered wholesalers, dealers or distributors of sugar buying huge quantities from sugar mills to broaden the tax base.

“The unregistered buyers of sugar largely remained outside the tax net and were evading the prime national responsibility of paying taxes,” the president passed these directions while upholding a decision of the Federal Tax Ombudsman (FTO) directing the FBR to bring unregistered buyers of sugar in bulk into the tax net to improve the collection of sales tax and reporting compliance within 90 days.

The president observed that the FTO’s recommendations were only a reiteration of the duty of the FBR to strictly deal with unregistered sugar dealers to bring them under the tax net. He directed that the FTO’s recommendations must be applied to the entire sugar sector to increase compliance with taxes and to enroll those who were escaping the prime national responsibility of paying taxes. The president disposed of the FBR’s representation with the direction to submit a comprehensive implementation report to the FTO within 60 days.

As per details, the FTO had initiated an Own Motion investigation against the failure of the FBR to bring into the tax net the unregistered buyers of sugar from M/s Naudero Sugar Mills (Pvt) Ltd. The FTO observed that non-NTN holders had been buying huge quantities of sugar from sugar mills and their data was fully accessible by the FBR but this huge potential for tax collection remained unutilised. In its report, the FTO highlighted that during the last four years sugar at cost of Rs2.7 billion was supplied by the said mills to various unregistered buyers, only three buyers held NTN, and the FBR had not paid due attention to broadening the tax base.

Sugar: coming full circle?

It further observed that this low hanging fruit had not yet been harvested and despite making huge monetary transactions, unregistered buyers of sugar remained outside the tax net. The FTO underscored that unregistered persons were easily identifiable because sugar mills were required to maintain records of supplies made during the tax period and issue tax invoices indicating names, addresses, description, quantity, values of goods, CNIC or NTN of persons to whom the supplies were made under the Sales Tax Act of 1990.

Based on these findings, the FTO had directed the Chief Commissioner, Large Taxpayers’ Office, Karachi to enforce compliance after obtaining data of unregistered persons from the sugar mills. The FBR filed a representation with the president against this order of the FTO.

President Alvi disposed of the matter with the observations that the FBR’s field formations were not vigilant in collecting information related to unregistered buyers and were content with just whatever was being submitted in the monthly sales tax returns of mills. He regretted that the data of unregistered buyers was not being examined for the purpose of broadening the tax net. He noted that the FBR’s field formations held jurisdiction over sugar mills and could secure the complete particulars of all buyers by proper and timely analysis of withholding statements.

He said that serious negligence and inefficiency on part of the field formations of the FBR in the discharge of its duties was tantamount to maladministration.

Copyright Business Recorder, 2022

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