Sugar sector pays Rs110bn in taxes in FY25

ISLAMABAD: The sugar industry contributed Rs110 billion to the national exchequer in FY2025, but estimates suggest politically connected manufacturers underpaid taxes by Rs40 billion, according to FBR officials.

The FBR had projected the sector’s revenue potential at Rs150 billion based on prevailing sugar prices. However, manufacturers reportedly paid taxes at lower declared rates while selling the commodity at higher market prices—a discrepancy that allegedly cost the treasury Rs40 billion in lost revenue.

“While the sector remitted Rs110 billion in taxes including GST, the payments were calculated on understated values compared to actual retail prices,” a top official revealed to The News on Wednesday.

Despite installing the Track and Trace System and invoking Section 40-B of the Sales Tax Act to station officers at sugar mills, the FBR has struggled to fully document the sector. Officials cite difficulties in distinguishing between manufacturers, wholesalers and retailers, particularly with dominant players allegedly manipulating supply-demand dynamics.

A past CCP report had identified systemic vulnerabilities across the sugarcane-to-sugar value chain and recommended deregulation. However, these structural issues remain unresolved.

During a high-level meeting chaired by PM Shehbaz Sharif, authorities emphasised maximising trader tax contributions. Current retailer/ wholesaler payments—including withholding taxes (Sections 236G/H), advance electricity bill taxes, and return filings—total Rs610-620 billion annually, with retailers alone contributing Rs400 billion.

The IMF has opposed Pakistan’s tax exemption on 500,000 tons of sugar imports, warning it could disrupt domestic market dynamics.