The Federal Board of Revenue (FBR) has categorically conveyed to the sugar mills that the mode of payment and collection of duty/tax on sugar has not been changed in the budget for 2011-12, and the federal excise duty (FED) @ 8 percent would be chargeable on the stocks lying with sugar mills as on June 4, 2011, as and when supply of the commodity is made at domestic stage.
In this connection, the FBR issued instructions to the Chief Commissioners of the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) here on Tuesday. The FBR has issued clarification on the request of certain sugar mills to clarify status of the FED on sugar produced prior to June 4, 2011.
According to the FBR's instructions, prior to June 4, 2011, sales tax @ 8 percent on the actual transactional value was chargeable on White Crystalline Sugar and wef June 4, 2011 the FED @ 8 percent in sales tax mode is chargeable on White Crystalline Sugar. The FBR has clarified that the mode and manner of payment and collection of duty/tax on sugar has not been changed. The FED @ 8 percent is, therefore, chargeable on the stocks lying with sugar mills on 4th June, 2011, as and when supply is made, the FBR added.
Sources said that certain sugar mills had informed the FBR that the white crystalline sugar has been exempted from the sales tax wef June 4, 2011 vide SRO 481(1)/2011 dated 3 June 2011 and the Federal Excise Duty (FED) @ 8 percent ad val has been levied u/s 3 of the Federal Excise Act, 2005 payable in sales tax mode on the sugar produced in Pakistan or imported into Pakistan wef June 4, 2011 vide amendments made in the Federal Excise Act by the Finance Bill, 2011 read with the Declaration under the provisions of section 3 of the Provisional Collection of Taxes Act,-1931 (Provisional Collection Act).
The FED has been levied u/s 3(1) of the Federal Excise Act on the sugar produced in Pakistan or imported into Pakistan wef June 4, 2011 as nothing has been prescribed for retrospective application of the levy and in absence of prescribed retrospective application the levy is not to be assumed as chargeable retrospectively. FED was levied vide amendments made in the Federal Excise Act through the Finance Bill, 2011 read with declaration made under the Provisional Collection Act. The effect of this declaration in respect of the levy of FED on sugar is that FED is leviable u/s 3 of the Federal Excise Act on the sugar produced in Pakistan or imported into Pakistan w.e.f. 04 June 2011. Otherwise, had it not been so declared under the Provisional Collection Act, the FED would had been leviable u/s 3 of Federal Excise Act on the sugar produced in Pakistan or imported into Pakistan wef 1 July 2011. The declaration under the Provisional Collection Act does not change the basis of chargeability of FED from production to sales; it remains production based.
It has been further pointed out that the FED is payable in "sales tax mode", which as per section 7 read with section 2(21a) of Federal Excise Act entitles adjustment of input sales tax against the FED payable and vice versa and prescribes the manner of payment of FED as the same as that of the manner of payment of sales tax. Leviability of FED remains on production and import based u/s 3(1) of Federal Excise Act. "sales tax mode", contained u/s 2(21a) of FE Act, reads as under:
"('21a,) "sales tax mode" means the manner of collection and payment under the Sales Tax Act, 1990. and rules made there under, of the duties of excise chargeable under this Act specified to be collected and paid as if such duties were tax chargeable under section 3 of the said Act and all the provisions of that Act and rules, notifications, orders and instructions made or issued there under shall, mutatis mutandis, apply to the excise duty so chargeable;", it added.
For levy of FED under Federal Excise Act, the charging section is 3, other sections and provisions of Federal Excise Act do not "charge" the FED but deal only with mode of payment, input adjustment, value of supply, time of payment and rate of duty, etc. Chargeability of FED remains on production under the provisions of section 3 of Federal Excise Act, sugar mills said.
Therefore as per law, certain sugar mills were of the view that the FED is not leviable retrospectively on the sale of sugar which was already produced and was lying as open stock on June 4, 2011. Despite this, sugar mills are paying the FED on such sales and units have so far deposited the FED on the sale of such sugar during the period from June 4, 2011 to June 30, 2011 into the Government Treasury on July 15, 2011. The units are paying the FED, being compliant taxpayers, to avoid litigation, with the hope that FBR will issue the clarification and will appraise sugar mills for proper compliance accordingly.
The sugar mills had requested the FBR to clarify whether or not the FED is payable on sale after 04 June 2011 of sugar which was already produced and was lying as opening stock on June 4, 2011? It is further requested that FED paid by sugar mills may be ordered to be refunded, if it is clarified to be not payable.
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