Ministry of Industries and Production (MoI&P) and Federal Board of Revenue (FBR) are presenting different statistics of the impact of the withdrawal of the concession on sales tax on retail price of sugar. FBR maintains that on the basis of applying an average assessable value of Rs 55 per kg, the increase in price per kg for the consumer would be Rs 2.09 per kg whereas MoI&P argues that the increase in sugar price will be around Rs 10 per kg.
The assessment of the MoI&P is backed by Pakistan Sugar Mills Association (PSMA) that has forecast a raise in sugar prices from 6-10 rupees per kg due to withdrawal of concession of sales tax. Before the issuance of SRO, FBR argued that assessable value of Rs 28.88 per kg was creating market distortion since ex-factory price range between Rs 50 to Rs 60. Without disturbing the relief to the general consumers of 8 per cent sales tax, granted earlier, the FBR has proposed charging sales tax on actual ex-factory price of sugar.
When contacted Chairman PSMA Javed Kayani said that increase in sales tax rate would only add to the misery of the poor consumers of the country therefore determination of tax liability for the consumers was also important to mitigate their suffering.
"I have written a letter to Chairman FBR Salman Siddique requesting him to fix the assessable value of sales tax collection at a uniform rate 55 per kg," he added. The system of fixed assessable value was introduced in April 1998 that continued to increase systematically but under the recently promulgated presidential ordinance the calculation of sales tax is to be made on the floating ex mill rate and the incidence of sales tax would continue to increase thereby further pushing up the sale price of sugar.
Javed Kayani explained that the sugar rate varies from region to region, district to district and mill to mill and in one day the price fluctuates several times therefore it will only create ambiguities for the tax authorities at the time of assessment. He said for purposes of calculation of sales tax, an assessable value was imperative to avoid any complications and ensure revenue to the exchequer.
"I have requested the FBR to follow the pragmatic approach which has successfully given the desired results in the past and collection of revenues from the sugar industry remained satisfactory. I have urged Chairman FBR to immediately rectify this anomaly for transparent invoicing and taxation," he continued. Replying to another question, he clarifies that the PSMA wants the government to procure 200,000 MT of sugar from mills so that they can pay to the growers, adding that mills are not asking for an increase in credit line limits.
According to official documents, the MoI&P has proposed to the government to financially enable the Utility Stores Corporation of Pakistan (USC) to purchase from the market if it feels that doing so is a viable option subject to the condition that no subsidies are extended. The Ministry also urged TCP to purchase 100,000 tons of sugar from PSMA and keep the stocks in the mill godowns at no additional cost.