Concessions no more

50% GST discount on sugar to be repealed, taxable value to increase.

ISLAMABAD: The federal government has decided, in principle, to increase the value of sugar on which sales tax is imposed to Rs55 per kilogramme (kg) from Rs29 per kg. The government has also decided to eliminate the 50 per cent concession on general sales tax on sugar.

According to an official of the ministry of finance, the Federal Board of Revenue (FBR) had sent the relevant summary to the Economic Coordination Committee (ECC) on numerous occasions without receiving a response but now the government has finally decided to take action against the monthly loss in revenue of Rs3 billion. Sugar will not be taxed according to the conventional sales tax rate and the value of sugar on which this tax is imposed will also be increased, he added.

The ECC will approve these recommendations in its next meeting, he said, adding the reforms coordination group has also prepared and submitted a report to the ministry of finance in this context.

According to Abdullah Yousuf, a member of the reforms coordination group and a former chairman of the FBR, the group had recommended the receipt of sales tax on sugar along standard lines and an increase in the per kg value of sugar upon which the tax is imposed due to a large disconnect between current market prices and the old value. He estimated that the concessions granted in sales tax to the sugar industry result in a loss of Rs20-22 billion per year and that the loss would be more if the undervaluation of sugar is considered.

Published in The Express Tribune, October 31^st, 2010.