ISLAMABAD, Aug 9: Facing a Rs8 billion worth of surplus by end of the season, the sugar industry has asked the government to immediately withdraw three per cent additional sales tax on sugar, Dawn has learnt.

The sugar surplus at the end of the year, i.e after October this year, is estimated at around 400,000 tons. The surplus might have gone even higher had the government not intercepted consignments of around 50,000 tons of raw sugar on its way from Thailand.

This quantity, official sources said, was being imported by a private party in the name of exporting the same to Afghanistan. The government sources said that the commodity was in fact meant for local consumption, which could have caused losses to the farmer community and the local sugar industry.

The government, these sources said, moved swiftly and got a decision from the Economic Coordination Committee (ECC) of the Cabinet last week to impose a Rs5 per kg additional duty on the import of raw sugar to protect the farmers and industrialists.

According to a letter obtained from the Central Board of Revenue, the Pakistan Sugar Mills Association (PSMA) had pleaded that sale value of sugar has increased by 50 paisa per kg — an additional burden on mills and the consumers. At an average three million tons of sugar production, the additional three per cent sales tax translates into Rs1.5 billion revenue to the government.

The government had imposed three per cent additional sales tax on sugar sale around two years back to register traders and dealers under the sales tax regime. With this, total sales tax on sugar increased to 18 per cent unlike all other food items.

The sugar industry has contended that all food commodities were exempted from sales tax except sugar. The additional cost is borne by the producers and the consumers.

The sugar industry believed that traders and dealers in food commodities were not registered in sales tax because of sales tax exemption to other food items and, therefore, they were least bothered to get themselves registered to deal in sugar only.

When contacted, PSMA secretary general K. Ali Qazilbash confirmed that the association had taken up the subject with the government because the industry was unable to bear 50 paisa per unit additional cost at a time when sugar prices were already depressed.

Until November 1999, sugar was subject to a maximum of Rs2.10 per kg central excise duty or sales tax. In November 1999, sales tax became applicable on the sale value at mills and the tax volume increased to Rs2.90-3.50 per kg.

Mr. Qazilbash said that the objective of registration of traders and dealers under the sales tax regime through the levy of additional three per cent sales tax on sugar remained counter- productive.

He said the government should register all the traders and dealers under the sales tax regime, but additional tax measure was not the intelligent tool towards that end.

He said that if three per cent additional sales tax was not withdrawn immediately coupled with Rs5 per kg duty on imported raw sugar, heavy amounts payable to the banks and growers by the sugar industry would be stuck up.