ISLAMABAD: The Federal Board of Revenue (FBR) has proposed rationalization of 8 percent adjustable Federal Excise Duty with 6 percent non-adjustable FED on sugar in budget (2014-15) to generate additional revenue of Rs5 to 6 billion during next fiscal year.
According to reports, the FBR has proposed reduction in the FED from 8 to 6 percent on sugar. However, it has been proposed to replace 8 percent adjustable FED with 6 percent FED in non-adjustable (non-VAT) mode.
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The Ministry of Finance has received the FBR budget proposal to rationalise tax rate. According to the budget proposal, the 8 percent FED was levied on sugar in lieu of sales tax. Despite half of the standard rate, input tax is being adjusted by the sugar industry on standard rate of 17 percent. Moreover, the input tax is also being claimed against fertilisers, building materials and other goods and services which are not directly used for the manufacturing of sugar. As a result of FED applicability on sugar, most of sugar supplies are made to unregistered persons without payment of ‘further tax’ as this tax is applicable on supplies to unregistered persons with the sales tax department but in case of sugar, FED is applicable on supply of the commodity. Therefore, it has been proposed to impose FED in non-adjustable (non-VAT) mode at the rate of 6 percent on sugar.
A look on the last budget (2013-14) reflects that the FBR made an attempt to enforce a new kind of taxation on sugar industry to collect sales tax/excise duty on capacity basis of the sugar mills to check evasion. But the proposal was not materalised.
