ISLAMABAD    -    Federal Board of Revenue (FBR) has decided to initiate a panel audit of the Sugar industry in order to improve tax compliance and ensure transparency in reporting mechanism.

“FBR believes in improving compliance through education, facilitation, transparent and fair application of Law,” FBR chairman Shabbar Zaidi said on his social media account. Meanwhile, the Federal Board of Revenue has also clarified that the FBR has decided to initiate panel audit of sugar industry under section 32A of the Sales Tax Act, 1990 to improve tax compliance and ensure transparency in reporting mechanism.

According to the FBR, the investigative audit has nothing to do with any tax evasion unearthed in sugar industry. It has also clarified that FBR has decided to initiate panel audit of sugar industry under section 32A of the of the Sales Tax Act, 1990 in order to improve tax compliance and ensure transparency in reporting mechanism. The FBR believes in improving compliance through educating, facilitating and transparent and fair application of law, it added.

An official of FBR informed that audit would be conducted by special audit panels comprising officers of Inland Revenue and independent chartered accountants.  A report quoted FBR by saying as sugar sector analysis revealed huge tax evasion in sugar sector and it was evident that the stocktaking carried out by field formations of FBR, and the sugarcane commissioner of three provinces had a difference of 641,000 tons. This showed that the sugar mills were under-reporting their stock in order to evade tax payments. It further revealed that local supplies during the tax period of July 2019 fell by 255 percent due to enhancement in tax rate to 17 percent in July 2019 from eight percent in June 2019.

 The FBR, according to the report, analysis further revealed that the stock holding last year ending June 2018 was 3,147,000 tons, whereas closing stock of the year ending on June 2019 was only 2,230,778 tons, which showed 29 percent decline. “The sugar manufacturers had declared high quantity of supplies during June 2019 to evade sales tax as the tax rate was to increase in July 2019.” It was also discovered that sugar recovery rate from 11.52 to 8.59 percent and molasses recovery rate from 4.59 to 3.8 percent was undocumented and unsubstantiated, as it was based on self declaration by mills.