Ever since the Finance Bill for 2004-2005 has been promulgated, cotton seed oil has been subjected to sales tax. But on cotton seed sales tax is not levied. The oil mills have agitated against this, and demanded that sales tax be levied upon cotton seed.
In the previous years, sales tax was charged on cotton seed, oil millers used to include the same in the cost of oil/oil cake (as purchase expenses) and also claimed that the sales tax paid as an input against the sale of oil, because sales of oil cake was not subjected to sales tax.
Through this process, the oil miss had received huge amounts of sales tax refunds, and did not bother to declare the same to the income-tax authorities. It has also been observed, that the sale of oil declared by the oil mills is very much lover as compared to the sales declared to the sales tax authorities. All this was being done in connivance with the concerned authorities.
It is, therefore, suggested, that under no pressure the demand of the oil mills to levy sales tax upon cotton seed be accepted, as the same shall result in the loss of billions to the exchequer.