Sugar industry makes insignificant tax contribution

ISLAMABAD: The domestic sugar industry paid only Rs 357.39 million under head of direct taxes in the 2003-04 to the Central Board of Revenue (CBR) out of the total collection of Rs 165 billion in direct taxes in the last fiscal year.

According to a quarterly review of the CBR released on Tuesday, the local sugar industry has paid a very negligible amount of direct taxes in the last fiscal. The review profiles the sugar industry of the country, which is the second largest after textile.

The review said ten leading sugar-manufacturing units paid only Rs 112.12 million during 2003-04 while the industry as a whole paid Rs 357.39 million in direct taxes, which the CBR termed as negligible contribution from the industry.

During 2002-03, the industry as a whole paid Rs 44.21 million in direct taxes while the contribution of ten leading manufacturing units stood at Rs 18.64 million during the same year. According to the review, collection of direct taxes from ten leading industrial units namely Hamza Sugar Mills stood at Rs 3.78 million, Rs 5.69 million from JDW Sugar Mills, Rs 74.24 million from Shahtaj Sugar Mills, Rs 0.5 million from Indus Sugar Mills, Rs 8.51 million from H Waqas Sugar Mills, Rs 5.31 million from Ramzan Sugar Mills and Rs 14.04 million from Habib Sugar Mills during the last fiscal year.

The contribution from other sugar mills, which are among leading units, like Shakarganj Mills, Sheikoo Sugar Mills and Fatima Sugar Mills remained at zero during the last fiscal, it added.

Indirect taxes: The review said that indirect taxes from the industry have been stagnant around Rs 8 billion over the last three years and added that preliminary analysis reveals a significant gap between the actual and the potential sales tax receipts.

“The real contribution of the industry, in terms of income and corporate taxes has been quite insignificant and appears to be far less than its actual potential,” it said. “This situation warrants immediate remedial measures as the government cannot continue to bestow incentives forever if its own revenue security is not ensured,” the review said.

It pointed out that the per capita consumption of sugar in the country has increased sharply from 3.4 kg in 1962 to around 24 kg in 2003, which is high compared to world standards. “This ever-increasing demand had not been met from domestic production until 1999,” it said and added 839,000 tons of surplus stock of sugar became available in 2003.

The CBR observed that the revenue generated through indirect taxes from sugar mills increased from Rs 164.8 million during 1996-97 to Rs 8.4 billion in 2001-02 while tax collection stood at Rs 8 billion in 2003-04.

The review said collection of customs duty on the import of sugar has been fairly uneven during the last eight years due to varying import requirements during these years. The highest amount of customs duty of Rs 1.5 billion was collected during 2000-01 in view of the declining domestic production and increasing import requirements, it said and added import of sugar was 66,000 tons in 1999-2000 that jumped to 930,000 tons in 2000-01.

The sugar producers were operating under the central excise (CED) regime that is now completely replaced by GST.

The CED rate structure was continuously revised downward until was completely withdrawn from sugar in 1999. As far as, sales tax is concerned sugar remained exempted from GST until 1997-98, the review document said. —Staff Report

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