The Federal Board of Revenue (FBR) has estimated collection of around Rs 30-35 billion from the sugar industry in case the government withdraws concessionary rate of sales tax on the locally produced sugar during implementation of the 'reformed general sales tax' (RGST).
Sources told Business Recorder here on Wednesday that imposition of the standard rate of sales tax on sugar would generate around Rs 30-35 billion from the sugar sector. In addition to around Rs 12 billion already collected from this sector, the FBR would be able to generate over and above Rs 20 billion in case standard rate of sales tax is imposed on sugar.
At present, sugar sector is paying sales tax on three times less value of the commodity which resulted in substantial reduction in payment of sales tax. The sales tax has been charged on the basis of fixed assessment value which is presently very low as compared to the actual market price of sugar.
According to rough estimates, the withdrawal of sales tax exemptions would help in generating over Rs 40 billion as sales tax during implementation of the reformed GST. At the same time, only one commodity can help in contributing to over Rs 30 billion following imposition of the standard rate of sales tax on sugar industry.
Despite extraordinary increase in the price of the commodity, the assessment value for the calculation of sales tax was Rs 29 per kg which was fixed few years back. The assessment value for the calculation of sales tax is still Rs 29 per kg which is very low. The FBR is facing revenue loss of Rs 2 billion per month due 50 percent reduction in sales tax on sugar. T he government had reduced the sales tax rate from 16 per cent to 8 per cent by August 2009, but this incentive did not reach the retail stage.
The government had reduced assessment value from Rs 21 per kg to Rs 19 per kg on taxable supply of locally produced white crystalline sugar for calculation of sales tax. At that time, the board had accepted the demand of the sugar industry to reduce the incidence of sales tax on the locally produced sugar falling decrease in its prices in the local market. Now the situation has been entirely changed and the price of the commodity has touched around Rs 90 per kg.