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November 26, 2020

Govt supports tax-free sugar imports as food processors make millions

Business

November 26, 2020

LAHORE: The government has defended its move to allow tax-free imports of sugar, although food processors have made millions by exploiting the facility originally announced to stabilise prices in the market, sources said on Wednesday.

Minister for Industries and Production Hammad Azhar told The News that government did not give any tax benefit to processors on sugar imports in real terms.

“The sales tax on output will eliminate any tax relief and other taxes will also be adjustable,” Azhar said in a reply to question about no relief to consumers.

The minister said Trading Corporation of Pakistan (TCP) could not buy required quantity of sugar. Private parties and processors imported about 150,000 tons of sugar on their own, “which ultimately helped in easing supplies”.

The government decided to import 300,000 tons sugar between August 25 and November 15. However, a good number of processors defeated the idea of importing relatively cheap sugar for masses as they quietly got benefit of tax-free import by succeeding in importing huge quantities of inexpensive sugar for their own use, according to sources. Processors made millions in this connection and deceived government machinery with much ease, they said.

Sugar was to be imported to supplement dwindling supplies of sweetener in the market in the last few weeks ahead of start of sugarcane crushing season in a bid to arrest surging price hovering over Rs100 per kg in the retail market. One of the motives behind imports of sugar was also said to be maintaining buffer stocks of commodity as well.

However, sources said, TCP imported around 150,000 tons of sugar and influential processors quietly got themselves allotted quotas to import tax-free cheap remaining quantity of 150,000 tons.

Sources said the government ‘generously’ allotted quotas to food processors on the same terms and conditions, enabling them to make hefty profits in the garb of importing tax-free sugar, which was in fact aimed at stabilising price in the retail market.

The landed price of imported sugar was much cheaper than the ex-mill price of local sugar. This one difference was ample to provide considerable financial gain to fortunate processors other than the tax relief, said sources.

Moreover, food processors used to buy sugar for own consumptions in bulk and usually are least affected from any supply bottleneck, sources said. Therefore, they are not in much need of importing sugar just before start of new sugarcane crushing season. The only motive for importing sugar is to make money by utilising cheap sugar or selling tax-free sugar in the open market at much higher price.

In August, the government exempted the import of 300,000 tons of sugar from withholding tax and 17 percent sales tax to lower the price of the sweetener in the country. In two separate notifications, the Federal Board of Revenue said sales and income taxes on the import of 300,000 tons of white sugar by the TCP had been withdrawn.

The Economic Coordination Committee (ECC) of the cabinet allowed import of 300,000 tons of sugar expecting a shortage of the commodity.

“The ECC considered a proposal of the ministry of industries and production for the import of refined sugar by the TCP to maintain buffer stocks, and allowed import of up to 300,000 tons of white sugar,” the finance ministry said in a statement.