FBR to abolish sales tax concession on sugar by month-end

The Federal Board of Revenue (FBR) will abolish tax concession available on the supply of sugar by the end of this month, official sources said on Thursday.

“The concession available on the sugar sales will end on November 30, 2021,” a senior official at the Large Taxpayers Office (LTO) Karachi said.

Through the Finance Act, 2021, the government withdrew the minimum sales tax rate on sugar. Further, the sales tax on sugar supply was made subject to retail price. However, with the rising trend in sugar retail prices, the prime minister directed the tax authorities to defer the implementation of sales tax on retail sales of sugar for some time.

In pursuance to the prime minister’s directive, the FBR issued a SRO 989 (I)/2021 on August 5, 2021 to postpone the implementation of the sales tax on sugar at retail stage. Now, the sales tax rate at 17 per cent would be applicable on the retail sale of sugar from December 1, 2021. The retail price of sugar/kilogramme is hovering around Rs110 and Rs120 in the domestic markets. The retail price of the commodity hit Rs160 last week, owing to the supply constraints.

The official said the withdrawal of tax concession would have an implication on the retail price. However, the official said the crushing season is about to start by November 20, 2021, which would ensure the availability of the commodity and it would also reduce the price in the open market.

Prior to the Finance Act, 2021, the sugar was subject to sales tax at minimum value of Rs60/kilogramme, however, following the directives of the prime minister to provide relief and considering the higher price of the commodity, the revenue board enhanced the minimum value up to Rs72 for the calculation of sales tax.

To maintain the sugar prices after the crushing season, the FBR has decided to deploy officials at all the sugar mills across the country. The LTO Karachi official said the unit has the jurisdiction over around 34 sugar mills. The unit is seeking approval from the FBR for posting tax officials at the sugar mills.

Meanwhile, the LTO Lahore, having jurisdiction over sugar mills, had already started deploying officials. The official said the FBR intended to monitor the entire supply chain of sugar from manufacturing to retail in order to plug tax leakages.