FBR to impose ‘heavy’ penalties on sugar mills

KARACHI: The Federal Board of Revenue (FBR) has decided to impose ‘heavy’ penalties on sugar mills if they fail to connect their facilities through real-time video links with the tax authority, it said on Friday.

The FBR warned sugar mills and vendors who install video analytics system (VAS) to get the task done by January 31 otherwise they would face heavy penalties from February.

The FBR issued instructions to chief commissioners having jurisdictions to impose penalty on non-compliant sugar mills. The FBR also issued warning to the selected vendors of fine and penalties on non-compliance.

The FBR said the sugar mills were asked to provide mill-wise updated status of deployment of VAS by December 31, which was further extended up to January 31.

“Only few sugar mills have issued final quotations to vendors for installation of the system. However, a large number of sugar mills are not willing to implement the system as they have either issued provisional quotations or not issued any quotation,” the FBR said in a statement. “The FBR will take action by imposing heavy penalties on non-compliant sugar mills and non-compliant vendors if they fail to install the video analytics equipment at their factory premises by January 31, 2021,” said the FBR. The tax authorities in November last issued notices to sugar mills to install a mandatory VAS system at their factory premises for sharing purchases, production and supply. The directives were issued with intention to monitor the production of sugar for the crushing season 2020/21.

The FBR also issued a list of seven vendors supplying VAS to sugar mills, which include AJCL (Pvt) Limited, TPL Trakker, CNS Engineering Technology, NRTC and GCS, COMMTEL, DWP, and Focus Technology.

The FBR made changes to Sales Tax Rules 2006 and introduced rules namely ‘Video Analytics Rules for Electronic Monitoring of Production of Specified Goods’ through a statutory regulatory order (SRO 889(I)/2020) in September last year.

The FBR and Pakistan Sugar Mills Association (PSMA) later in October signed a memorandum of understanding for the implementation of video analytics rules. The monitoring of production and supply of sugar was initiated after massive tax evasion detected in the sector, which also included suppression of sales and concealment of income. The Large Taxpayers Office Karachi, which has jurisdiction on 29 sugar mills out of around 80 in the country, in its audit exercise – July 2020- January 2021 – created a tax demand of Rs500 billion in both sales tax and income tax.

Video analytics technology has been introduced to monitor the production of specified goods through high tech video cameras to be installed on the production lines of the sugar industry. The introduction of new technology has been aimed at enabling FBR to receive real-time video analytics data of production from the manufacturing sites and use it for tax collection purposes. The FBR has been giving time relaxation to both sugar mills and VAS vendors to ensure installation of the equipment.

The FBR said the prequalified vendors failed to install the video analytics equipment on the sugar mills, which have issued final quotations to the pre-qualified vendors for the system. The FBR further said the video analytics rules clearly laid down responsibilities of the manufacturers to provide unhindered availability of production facilities for installation of the system. They also determine penalty of non-removal of goods from business premises by non-compliant manufacturing units.