Retail price of sugar may be abolished for sales tax

Retail price of sugar may be abolished for sales tax

ISLAMABAD: The government has proposed to withdraw sugar for charging sales tax on retail price by making amendment in the main tax law.

Through Finance (Supplementary) Bill, 2021 dated December 30, 2021, the government proposed to withdraw the condition of collecting sales tax on sugar retail price.

The government after just six months of making legislation regarding sales tax on sugar has proposed to withdraw the law.

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In case the parliament approve the bill, then whatever retail price is the sales tax to be collected at the value notified by the Federal Board of Revenue (FBR).

The FBR through SRO 1027(I)/2021 dated August 16, 2021, notified the minimum value of the domestically produced white crystalline sugar at Rs72.22 per kilogram from Rs60/kg.

The FBR on July 01, 2021 issued Circular No. 02 of 2021 to explain inclusion of sugar in the Third Schedule to the Sales Tax Act, 1990.

“Currently, the price of white crystalline sugar is fixed at Rs60/kg in terms of SRO 812(I)/2016 dated September 02, 2016, which is considerably below the actual market price of the commodity. In order to address this anomaly, sugar is proposed to be included in the Third Schedule to the Sales Tax Act, 1990, so that sales tax is charged and collected on actual retail price of the product at the manufacturing stage.

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“This measure would not only ensure due payment but also help in putting a more effective price control mechanism in place for sugar.”

In its memorandum on the finance supplementary bill, PwC A. F. Ferguson & Co. – a chartered accountancy firm, said that goods specified in the Third Schedule are subject to sales tax on their retail price.

“At present, the Government is empowered to include or exclude any goods from the Third Schedule through a notification. The Bill proposes to vest such power to the Board [FBR].”

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Through the Finance, 2021 sugar was included in the Third Schedule whereby sugar supplied other than as industrial raw material to pharmaceutical, beverage and confectionary industries was subject to sales tax at retail price.

Through SRO 989(I)/2021 dated August 5, 2021, sugar was taken out of Third Schedule for the period from July 1, 2021 till November 30, 2021.

The bill proposes to exclude sugar from Third Schedule w.e.f. December 1, 2021; thus, making it liable to sales tax at its value of supply across the board.

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KPMG Taseer Hadi & Co. – another chartered accountancy firm, explained that the Finance Act, 2021 had put sugar at serial No. 50 of the Third Schedule with the exception of sugar supplied as an industrial raw material to pharmaceutical, beverage and confectionary industries.

“Now the bill proposes to omit the entry, effective from December 01, 2021, meaning thereby that henceforth supply of sugar will be taxable at 17 per cent of the value thereof.”

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