Tax evasion in sugar sector: FBR suspends 6 officials

ISLAMABAD: The Federal Board of Revenue (FBR) has suspended its six officials in different parts of the country for their alleged involvement in tax evasion in the sugar sector.

The Intelligence Bureau (IB) shared reports about these officials who were involved in facilitating certain sugar millers in evading taxes. After receiving reports from multiple avenues, the FBR suspended six officials. This was done after the board received compromised integrity reports from the IB and other sources, said the official.

The Federal Board of Revenue (FBR) launched its operation against 10 sugar mills and identified five more throughout the country which were allegedly involved in selling sugar without passing through the Track and Trace System (TTS) and Hopper solutions. The technology installed as TTS and Hopper is meant to gauge the real production of sugar and some other sectors. But the FBR has found that certain sugar millers are involved in selling sugar without TTS stamps and passing through Hopper solutions.

“We have taken action against ten sugar mills and halted their operations. Later, some of them resumed operation after paying the penalty amount,” a top official of FBR told The News here on Sunday. The official shared a video clip showing how the sugar packets are prepared without TTS and other technological solutions.

For effective enforcement to plug leakages, the FBR has installed Track & Trace System (TTS) and Hopper Solution to gauge the real production of sugar mills across the country.

The FBR had invoked Section 40-B of the Sales Tax Act and deputed around 300 officers on all sugar mills to monitor their production and curb billions of rupees tax evasion.

The prime minister has approved powers to the Intelligence Bureau (IB) to keep strict surveillance over FBR’s designated monitoring officers on sugar mills as sales tax evasion of Rs40 billion on an annual basis is feared.

The FBR has devised a three-pronged strategy, including invoking 40-B of sales tax for deputing monitoring officers at sugar mills, effective placement of Track and Trace System (TTS) and assignment of officers for further monitoring of deputed officers. Out of the total production of 6.7 million tons of sugar, the sales tax collected at a rate of 18 percent should fetch an amount of Rs130 to Rs140 billion on an annual basis. However, the FBR’s collection stands at around Rs90 to Rs100 billion, so there is a tax gap of Rs30 to Rs40 billion at least. There is not much input involved except sugarcane and electricity, so there is no other way but to ensure proper monitoring of production for avoiding tax evasion.

One official said that the Track and Trace System was installed at 80 sugar mills but the FBR fears there is a possibility of sugar bags coming out without TTS stamps. It’s hard to explain because if the bags are without stamps, they could be seized. But there are chances that fake TTS stamps might be affixed to deceive the tax machinery. So, it needs proper scrutiny and enforcement as well as stern actions against those involved in such practices.