‘Factory hiding purchases of sugar cane to avoid sales tax’ | Instant News


KARACHI: The sugar factory did not issue receipts for the purchase of sugar cane from farmers in an attempt to avoid sales tax and other levies, it became known on Saturday.

Punjab Sugar Cane Commissioner recently notified authorities in a letter about a complaint of off-book sugarcane purchases.

“Farmers are complaining that some factories are involved in buying sugarcane off-book,” said the letter seen by The News. “This resulted in the avoidance of sales tax, sugarcane development tax, and other taxes.”

A source at the Karachi Large Tax Paying Office (LTO) said the government set a minimum support price for sugar cane of Rs200 for 40 kilograms. In this way the price has to be paid to farmers, the source added.

“However, by not issuing receipts, the sugar factory can reduce the amount of sugar cane purchased and further suppress the supply of production sugar,” said the tax official.

The Federal Revenue Council has recently stepped up efforts to increase oversight of sugar mills to document the actual transactions

LTO Karachi places officials in all 29 sugar factories under its jurisdiction. Officers will remain posted until the installation of a video analytics system (VAS) at the sugar factory. FBR set January 1, 2021 as the deadline for them to install VAS, according to sources.

Tax officials say the sale and purchase of undocumented sugar remains a big challenge for tax authorities.

Industry experts say once the sugar factory sells sugar, there is no trace of where it is traded or where it is stored. Sugar is traded on unregulated markets such as Jodia Bazar in Karachi and Akbari Mandi Lahore, they said.

Due to a lack of tracking and control, the sugar being sold is diverted to an undisclosed storage facility where the sugar is stockpiled. This creates a long profit line that drives up retail prices, according to experts.

A documented sugar market can lower retail prices and increase sugar mill profits. Experts say the commodity can be traded on the Pakistan Mercantile Exchange to document the sugar market. Sugar mills have large storage facilities for trading via commodity exchange.

A tax official previously said tax evasion in the sugar sector was massive because large supplies were being made to the undocumented sector.

However, the sugar factory stated that it has borne additional sales tax costs of around Rs13 billion per year for two and a half years due to differences in tax value.

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