The ''Plan-B'' of the Federal Board of Revenue (FBR) has proposed new tax measures, including restoration of 16 percent sales tax on sugar, to generate additional revenue of nearly Rs 12 billion from sugar sector.
Sources told Business Recorder that FBR''s ''Plan B'' has proposed three measures for increasing revenue collection from sugar sector. First, the rate of sales tax be enhanced on domestic supplies from 8 percent to 16 percent. Second, the assessable value for sales tax purpose be declared as the market value. Third, the notified import value of sugar be withdrawn. As a result of these measures, the FBR has estimated to collect approximately Rs 12 billion. According to sources, the FBR has forwarded the proposal to the Ministry of Finance for consideration. It depends on the policy makers to accept or reject the proposals of the tax authorities under ''Plan-B'' of the FBR.
The Board has already proposed to the Ministry of Finance to increase the rate of federal excise duty (FED) on selected items including cement to generate additional revenue under ''Plan-B''. The alternative, ''Plan-B'', has been chalked out by the tax authorities as replacement of the reformed general sales tax (RGST), if not implemented. The ''Plan-B'' is only workable in case the government would not be in a position to impose RGST. The rationale behind the ''Plan-B'' is to propose alternative taxation measures for generating additional revenue during current fiscal year. However, any enhancement in the tax rates would require legislative approval of the Parliament.
Sources said that beside other measures, the increase in the rate of sales tax on sugar has been proposed to the Finance Ministry according to ''Plan-B''. The increase in the rate of sales tax on sugar is part of the overall taxation proposals of the ''Plan-B'' of the government.
According to sources, the FBR wanted to withdraw concessionary rate of 8 percent sales tax on sugar, as decrease in sales tax has failed to reduce price of the commodity.
In the past, the government had reduced sales tax on local supply of sugar from 16 percent to 8 percent until further orders. Following PM''s decision, the FBR immediately issued the necessary notification. The notification pertaining to the assessable value of sales tax was not rescinded. This decision was taken to reduce sugar prices in the local market, but reduction in sales tax did not help in reducing price of the commodity. Sales tax on sugar was drastically cut to control the price of the commodity. Resultantly, the FBR suffered revenue loss in billions due to reduction in sales tax. Secondly, directives were issued from the highest level to maintain prices of sugar. Despite all measures of the government, the price of the commodity was not controlled which reflects that multiple factors are responsible for inflation.
Therefore, the FBR is proposing to the government to restore 16 percent sales tax on sugar through Ministry of Finance.
It is important to mention here that the former FBR Chairman Sohail Ahmed had informed the National Assembly Standing Committee on Finance that the FBR had reduced the sales tax rate from 16 percent to 8 percent in August 2009, but this incentive did not reach the retail stage. Despite decrease in sales tax, the benefit was not passed on to the consumers.
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