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February 13, 2013
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FBR officers tasked to monitor 67 sugar factories

February 13, 2013

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Tax evasion
ISLAMABAD: Taking serious notice of sharp drop in tax revenue collection from sugar mills, the Federal Board of Revenue has tasked 200 tax officers to monitor inventory position and production of 67 sugar factories operational all around the country, a senior official said.
Talking to The News on Tuesday, Senior Member Inland Revenue Service Asrar Raouf said the FBR has invoked section 40-B of Sales Tax Act 1990 that allows posting of tax officers at the premises of registered taxpayers after knowing that some sugar mills were not paying their due taxes.
“We have taken this step after knowing that tax collection from some sugar mills fell massively and even in certain cases the tax collection went down 60 to 70 percent,” he said.
Another FBR official said that as an incentive to sugar mill owners the FBR had slapped reduced rate of federal excise duty of 8 percent on them instead of standard general sales tax of 16 percent.
He said the incentive was extended with an expectation that sugar exports would yield $600 million during the current fiscal year thus shoring up foreign reserve position.
But, tax revenue went down to Rs3.370 billion in the first seven months (July-Jan) of FY13 as compared to Rs4.760 billion in the same period of the last fiscal year, he said while showing official record. The official said that the sugarcane production remained bumper during the period.
The sugar mills are owned by parliamentarians and politicians both from ruling and opposition parties including Pakistan People’s Party, Pakistan Muslim League (Q) and (N), and Pakistan Tehreek-e-Insaaf.
On the action, a representative of the Pakistan Sugar Mills Association (PSMA) said the FBR could do so, adding but there should not be an element of harassment in this exercise.
However, when tax officers entered a sugar mill named Rahim Yar Khan Sugar Mills belonging to a renowned politician of the area, who also remained minister of state during

the last government, they had to face resistance and a fighting-like situation erupted.
Now, the sugar mill has been closed down in protest and tax officers also sought help of local police to control any mishap in the premises of the sugar factory.
He said monitoring and vigilance teams are tasked to keep production volume under surveillance to frustrate any bid of tax evasion.
Two sugar mills, Kamalia Sugar Mills and Habib-Waqas Sugar Mills approached the Lahore High Court (LHC) against the FBR’s action. The LHC granted them stay order for two days and fixed today (Wednesday) for case hearing.
The FBR high-ups claimed that under the Sales Tax Act, the FBR posted its officers without giving any reason, but if commissioner of inland revenue would move ahead then he should have reasons to believe in shape of material evidence before stationing officers on premises of registered persons, said the official.
The section 40-B of Sales Tax Act states that subject to such conditions and restrictions, as deemed fit to impose, the board may post officer of inland revenue at the premises of registered person or class of such persons to monitor production, sale of taxable goods and the stock position provided that if a commissioner, on the basis of material evidence, has reason to believe that a registered person is involved in evasion of sales tax or tax fraud, he may, by recording the reason in writing, post an officer of inland revenue to the premises of such registered person to monitor production or sale of taxable goods and the stocks position.

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