‘Millers conceal sugarcane purchases to evade sales tax’

KARACHI: Sugar mills are not issuing receipts of sugarcane purchases from growers in a bid to allegedly evade sales taxes and other levies, it was learnt on Saturday.

The Cane Commissioner Punjab recently informed authorities in a letter about complaints of off-the-book purchases of sugarcane.

“Growers complained that some of the mills were involved in off-the-book purchase of sugarcane,” said the letter seen by The News. “This results in evasion of sales tax, sugarcane development cess and other taxes.”

Sources at Large Taxpayers Office (LTO) Karachi said the government fixed the minimum support price of sugarcane at Rs200 for 40 kilograms. In this way the price should be paid to the growers, the sources added.

“However, by not issuing receipts the sugar mills may reduce the quantity of purchased sugarcane and subsequently suppress the supply of manufactured sugar,” said the tax official.

The Federal Board of Revenue has recently stepped up efforts to increase surveillance of sugar mills to document actual transactions

LTO Karachi posted officials at all 29 sugar mills under its jurisdiction. The officials will remain posted till the installation of video analytics system (VAS) at sugar mills. The FBR set January 1, 2021 as the deadline for them to install VAS, according to the sources.

The tax official said the undocumented sales and purchase of sugar remain big challenge for tax authorities.

Industry experts said once the sugar mills sell sugar there is no track of where the sugar is traded or where it is stored. Sugar is traded in unregulated markets such as Jodia Bazar in Karachi and Akbari Mandi Lahore, they said.

Due to complete lack of tracking and control, the sold sugar is shifted to undisclosed storage facilities where sugar is hoarded. This creates a long line of profiteering which raises the retail prices, according to the experts.

A documented sugar market may reduce the price at retail and increase the profits of the sugar mills. The experts said the commodity may be traded at Pakistan Mercantile Exchange to document the sugar market. Sugar mills have large storage facilities for the trade through commodity exchange.

A tax official earlier said the tax evasion in the sugar sector is massive due to large supply made to the undocumented sector.

However, sugar mills said they have sustained the burden of additional sales tax cost of approximately Rs13 billion per annum for two and half years due to disparity in taxation values.