Non-compliant sugar mills face stern FBR action

ISLAMABAD: The Federal Board of Revenue (FBR) has started sealing non-compliant sugar mills in Punjab and Sindh and suspended nine tax officers/ officials involved in malpractices and were working in connivance with the mills to evade taxes.

Details revealed that on directives of the Prime Minister after the start of the crushing of sugarcane season for the year 2024-25, the Federal Board of Revenue (FBR) has launched an improved production monitoring system for sugar.

Currently, there are five oversight systems in place, which are the Track and Trace Stamps, Automated Counters at the Hoppers for counting of the produced bags, video recording and digital eye counting, Track invoicing system for all the despatches of sugar and posting of staff for overseeing the manufacturing and supervised sale of the sugar. The whole process is also being monitored by the teams of the Federal Investigation Agency (FIA) and Intelligence Bureau (IB) to ensure transparency in the whole system.

FBR closes down sugar mill in Sindh

The efficacy of the new system is ensured by posting of FBR personnel at each mill and monitoring of the system and personnel through integrated CCTV cameras and frequent visits by senior officers of FBR, as well as random checks by Inland Revenue Enforcement Network in the field. The enforcement measures are further augmented by the support of Police and Pakistan Rangers, which provide assistance in the monitoring and enforcement measures, wherever required.

There are 80 operational sugar mills in Pakistan, which produce sugar for the local consumption, as well as, export, along with production and export of molasses and ethanol, resulting in the enhancing foreign exchange reserves of Pakistan.

In the current year, the expected crop of sugarcane is estimated at 70 million metric tons, resulting in production of sugar in excess of 7 million metric tons of sugar. The opening stock at the start of the current crushing season was more than one million metric tons, and current production is adding into the available stock of sugar. Permanent posting of the staff in the previous season resulted in controlling the smuggling of sugar, which brought about drastic reduction in sugar price and the hording of sugar was controlled because of adequate supply. During the current crushing and production season of 2024-25 the Federal Board of Revenue has intensified its efforts to ensure compliance with tax laws and has taken strict action against irregularities in sugar mills across Pakistan.

In Punjab, LTO Lahore sealed a large sugar mill for non-installation of cameras and non-handing over of the Network Video Recorder (NVR) to FBR staff, and the production was stopped till the installation of cameras and complying with the other legal requirements.

In another incident, LTO Lahore sealed the godowns of the sugar mill located in Khushab District on13.12.2024 for thorough examination of the stocks for any un-stamped bags. The investigations are under process and legal action will be taken on completion of the investigations.

It has further been informed that action is expected against a sugar mill located in the Faisalabad district for non-compliance of the legal provisions.

In the province of Sindh, during a routine inspection, the Deputy Commissioner Inland Revenue (DCIR) from Large Taxpayers’ Office (LTO) Karachi a concealed chute (final production point in sugar milling process) at a sugar mill in Shaheed Benazirabad district was discovered, which had been installed by creating a diversion line in the process and placed at a remote location in the mill behind a high brick wall. The concealed chute was not declared to the authorities for installation of FBR’s integrated production monitoring system. The undeclared chute was immediately sealed, and 1,200 MT of sugar produced from the chute was confiscated. The action resulted in payment of 300% penalty along with the due amount of sales tax, in total Rs.25 Million for releasing the goods.

In a separate incident the FBR personnel stationed at a sugar mill in Mirpurkhas Division reported that the mill management had failed to hand over custody of the Network Video Recorder (NVR) to FBR staff, a gross violation of sales tax rules. A team of 20 personnel headed by 2 officers from Large Taxpayers’ Office Karachi immediately proceeded and sealed the production chutes at the mill. The mill management duly paid a penalty of Rs. 0.5 million for the de-sealing of the chutes.

In another incident upon receipt of a late-night report received at 3:00am on December 11, 2024, FBR personnel informed that a sugar mill’s production team in Tando Allahyar district that had disconnected the production chutes from the FBR’s integrated production monitoring system. Prompt action was initiated by the FBR focal person in Karachi, who coordinated with the concerned Commissioner-IR. With assistance from the RTO Hyderabad, a team led by the DCIR from LTO Karachi reached the mill and sealed the all production chutes. 150 MT of non-tax paid sugar was confiscated. Five vehicles being used to transport the non-tax paid sugar have also been impounded under relevant law and rules.

In addition to all the enforcement actions taken above, nine officers/ officials of the Federal Board of Revenue, who were found to be involved in malpractice and were working in connivance with the mills to evade taxes have been suspended on the credible information and the reports from the monitoring agencies.

The FBR reiterates its zero-tolerance policy against tax evasion and non-compliance. These actions are part of a broader campaign to enhance tax enforcement in the sugar sector and protect government revenue. Strict monitoring and swift action will continue to ensure adherence to the law.

Copyright Business Recorder, 2024