FBR field officers to audit all sugar mills

ISLAMABAD: In order to comply with the Sugar Inquiry Commission (SIC) report, the Federal Board of Revenue (FBR) has instructed its field formations all over the country to undertake audit of all sugar mills and come up with an assessment order by September 30.

The FBR has envisaged deadline of accomplishing all tasks starting from desk audit and identification of issues and assessment orders within three months. The field offices have been instructed to share the final report on September 30.

Through tax assessment orders, billions of rupees tax demand might come on the surface, as it is generally believed that the sugar millers had allegedly evaded hefty due taxes. However, it will be ascertained only after accomplishing assessment of all these sugar mills.

Now the official communication of FBR states that it is pertinent to highlight that certain specific issues have been pointed out in Sugar Inquiry Commission Report pertaining to six sugar mills only.

These issues have already been communicated to the field formations for taking legal actions. Keeping in view the sensitivity and importance of the issues, initiation of legal action in all sugar mills falling in your jurisdictions may be considered on priority and immediately with strict timelines.

The FBR has instructed to undertake identification of issues of sugar mills through desk audit on June 30, 2020. The FBR has given deadline of July 10, 2020 for selection of audit in Income Tax, Sales Tax, and Federal Excise Duty related to sugar mills located under their jurisdictions.

The requisition of record will be sought by July 25, 2020 deadline. Then the field formations will be tasked with preparation of audit reports until August 15, 2020.

The issuance of audit reports will have deadline of August 20, 2020. The sugar mills will be given opportunity for reply and rebuttal until September 5, 2020. The assessment orders will be issued by September 20.

All field formations have been assigned to provide compliance report until September 30, 2020. All field offices were instructed to strictly follow timelines for initiating legal action under your jurisdictions. The fortnightly report will be furnished with the FBR’s Member IR Operation on standard format on every 15th or 30th of every month.

The FBR has also decided to place a track and trace system for three more sectors – sugar, cement and fertilizer – from next fiscal year, as it will help in gauging real production of these sectors for getting due taxes.

The official said the Commission utilized the FBR’s data to investigate the sugar mills but now under the law, the FBR could open up audit of four major mills.

The FBR had kept minimum price at Rs60 per kg for deduction of sales tax.

Earlier, the Commission had held sugar millers responsible for evading billions of rupees tax and recommended that the matter be referred to the FBR for recovery of due taxes.

“The matter needs to be referred to the FBR with the instructions to recover the sales tax evaded by the sugar mills during last one year on additional amount of ex-mill price exceeding the FBR threshold of Rs60 per kg. Further, the FBR should take steps to immediately start collecting sales tax on actual prevailing ex-mill rates instead of benchmark rates of Rs60 per kg,” the Sugar Inquiry Commission recommends to FBR in its detailed report.

The Commission in its findings revealed that the increase in tax impact was Rs3.6 per kg due to increase in the rate of GST to 17 percent after 14 July 2019.

The real increase in the retail price occurred between December 2018 and June 2019 when it went up by about Rs16 per kg.

Similarly, the major increase in the ex-mill price occurred between December 2018 and June 2019 when it increased by almost Rs12 per kg which is from Rs51.64 to Rs63.59 per kg. This period saw no increase in sales or other taxes and the price of sugarcane, the major input, was stable.

The increase in retail price between July 2019 and January 2020 is from Rs71 per kg to Rs74.64 per kg the data, therefore, does not show any major effect on retail price.