Pakistan Sugar Mills Association (PSMA) which is being grilled by the Sugar Inquiry Commission on alleged tax evasion, Benami transactions, subsidy on export and suspicious export proceeds, has expressed "serious" reservations about the 'hypothetical' working and selective/incorrect accounting adopted by the Commission.
In a letter to Sugar Inquiry Commission Chairman Wajid Zia, Secretary General, PSMA, Anayat Khan acknowledged that it is a reality that significant quantity is sold through dealers/brokers and that most dealers/brokers and their customers are neither registered under the Sales Tax Act, nor income tax filers. The sugar mills cannot compel the dealers/brokers or their customers to register under the Sales Tax Act, 1990 or pay taxed under the Income Tax Ordinance, 2001. In fact, it is the responsibility of the FBR to ensure compliance by these dealers/brokers and their customers, which responsibility they have failed to discharge.
The association is of the view that mills cannot be held responsible and blamed for prevailing transaction modalities and systematic issues and shortcomings in the downstream sugar sector for which they are neither responsible nor liable. The Association says, it appears that an attempt is being made by the Commission to recast transactions with unregistered buyers as (Benami transactions" purportedly of the mills themselves. This is a patently absurd suggestion and seems like desperate measurers to vilify the sugar mills in the absence of any concrete evidence of wrongdoings.
According to PSMA, it appears that some concerns are also being raised by the Commission on advances that are routinely received by the sugar mills from brokers/dealers. To better understand this practice, it is important to understand the peculiar dynamics of the sugar industry, in that 100 per cent of raw material procurement and production in done in short time. As compared to this, the entire production of sugar, for obvious reasons, cannot be sold during this limited period.
The association is of the view that the Commission needs to give consideration to the role of other major stakeholders in the sugar sector value chain, such as the government(s), the growers and the brokers/dealers, which are all beneficiaries of the increase in prices.
The association further says that it was expected that with the valuable feedback from it, the Commission could avoid repeating the mistakes made by the committee and would be able to conduct a more meaningful and purposive analysis of the sugar sector. However, based on PSMA's two interactions as well as discussion its member mills who are being subjected to the detailed inquiry, it appears that the Commission has largely ignored the feedback provided by the Association and is persisting with the erroneous approach/ methodology that the reported suffered from. It seems as if rather then having a genuine desire to properly understand the sugar sector, the Commission ( which includes all three original committee members) is intent only on validating/ affirming the erroneous conclusions, conjectures and allegations made by the Committee in the committee report, even if the facts and date uncovered in the inquiry clearly do not support this. The entire exercise appears to have been carried out in an arbitrary, unfair, unreasonable, discriminatory, biased and opaque manner.
"By veering off into extraneous and irrelevant inquiries and probes, the Commission appears to have exceeded its mandate, which was to probe into increase in sugar prices in a specific time period only."
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