The President of Pakistan, Dr. Arif Alvi, has directed the Federal Board of Revenue (FBR) to bring unregistered wholesalers, dealers, and distributors of sugar, who buy huge quantities from sugar mills into the tax net to broaden the tax base.
He stated this while upholding a decision of the Federal Tax Ombudsman (FTO) for the FBR to include the unregistered buyers of sugar in bulk in the tax net to improve the collection of sales tax and report compliance within 90 days.
Dr. Alvi had noted that these unregistered buyers of sugar have largely remained outside the tax net despite making huge monetary transactions and the availability of their data with FBR and have been evading the prime national responsibility of paying taxes.
As per the details, the FTO had initiated an Own Motion investigation against the failure of the FBR to drive the unregistered buyers of sugar from M/s Naudero Sugar Mills (Pvt.) Ltd. into the tax net. The FTO had observed that non-NTN holders had been buying huge quantities of sugar from sugar mills and could fully access their data, but this huge potential for tax collection has remained unutilized.
In its report, the FTO had highlighted that sugar worth Rs 2.7 billion had been supplied by the mills in question to various unregistered buyers during the last four years’ while only three buyers had NTN, and FBR had neglected to broaden the tax base. It had found that this low-hanging fruit had not yet been harvested, and despite making huge monetary transactions, unregistered sugar buyers have remained outside the tax net.
The FTO emphasized that unregistered persons are easily identifiable because sugar mills are required to maintain records of the supplies provided during the tax period and issue tax invoices with the names, addresses, descriptions, quantities, values of goods, and CNICs or NTNs of recipients of the supplies under the Sales Tax Act, 1990. Based on these findings, the it had directed the Chief Commissioner, Large Taxpayers’ Office, Karachi, to enforce compliance after obtaining data of unregistered persons from the sugar mills.
However, the FBR had filed a representation with President Alvi against this order of the FTO.
He had disposed of the matter based on the findings that the FBR’s field formations had not been vigilant in collecting information related to unregistered buyers and were content with whatever was being submitted in the monthly sales tax returns of mills.
He was concerned that the data of unregistered buyers are not being examined to broaden the tax net and noted that the FBR’s field formations have jurisdiction over sugar mills and can secure the complete particulars of all the buyers through a proper and timely analysis of the withholding statements.
Dr. Alvi said that serious negligence and inefficiency by the FBR’s field formations in discharging its duties is tantamount to maladministration.
He further discerned that the FTO’s recommendations were only a reiteration of the FBR’s duty to deal strictly with unregistered sugar dealers to corral them into the tax net.
The President has announced that the FTO’s recommendations must be applied to the entire sugar sector to increase compliance with taxes and to enroll those who have been evading the prime national responsibility of paying taxes.
He disposed of the FBR’s representation with the direction to submit a comprehensive implementation report to the FTO within 60 days.