FBR to Consult Sugar Industry to Determine Sales Tax on Sugar

The Federal Board of Revenue (FBR) has decided to take input from the sugar industry for the fixation of minimum value on the supply of sugar for the calculation of sales tax, FBR officials revealed to ProPakiatani.

Pakistan Sugar Mills Association (“PSMA”) has informed the FBR that prices should not be set by the Government at all and should be determined by market forces of supply and demand. Similarly, FBR should not fix any minimum value of supply for sugar.

There should be no minimum value for fixation of sugar “. Furthermore, input/proposals have been again sought by FBR for sugar value fixation by December 5, 2022. The industry pleaded that FBR cannot exercise unbridled, unstructured, and discretionary power under proviso to section 2(46) of the Sales Tax Act to fix ex-mill sugar value.

The rate of sugar is not uniform throughout the season/country and in fact, fluctuates on a monthly and even weekly / daily basis and may vary on the same day within the same/different cities making all such efforts to fix a uniform or notional price of sugar (even for purposes of sales tax calculation) arbitrary, absurd, discriminatory and unreasonable, the industry added.

Neither the PSMA nor any sugar mills were given the opportunity of hearing before FBR in the captioned matter to date. Instead, only ‘input’ and ‘proposals’ have been sought from PSMA. It is respectfully submitted that merely seeking proposals does not satisfy the express undertaking given by representatives of FBR for providing the opportunity for hearing to sugar mills, as reflected in the Order.

The earlier proposal of PSMA shared vide letters dated September 28, 2022, and November 02, 2022 (contents whereof are not being repeated for sake of brevity and may kindly be deemed to be reiterated herein), has been rejected by FBR without any hearing and without providing any speaking order/reasons, which is contrary to the requirements of Section 24A of the General Clauses Act, 1897, the principles of natural justice as well as the aforementioned Order of the Honourable Lahore High Court.

Reasons have also not been given as to why it is considered “necessary” by FBR to fix the ex-mill value of the supply of sugar within the meaning of the proviso to sub-section (46) of Section 2 of the Sales Tax Act, 1990 (the “Act”). Therefore, you are requested to recall the aforementioned Letter and reconsider the earlier proposal of PSMA, after providing an opportunity for hearing to PSMA/sugar mills and their respective legal counsels, PSMA added.