LAHORE: The federal cabinet has decided to levy sales tax on the ex-mill price of sugar apparently in a bid to curtail the increase in retail price of the sweetener.

The sales tax on sugar was already at its ex-mill rate. But in the budget for the year 2021-22, it was taken down to retail level.

A member of the Pakistan Sugar Mills Association (PSMA) said the change in the levy of the sales tax from ex-mill to retail level led to a hike in the price of the commodity by around Rs0.85 to Rs1.0 per kg.

Tuesday’s federal cabinet decision will only reverse this situation.

PSMA Chairman Iskander Khan, however, asserts that ST on sugar, if taken as a staple food, should not be imposed.

“If sugar is considered as a staple food, then there should be no sales tax on it as is the case with flour, rice, pulses and many other eatables,” he tells Dawn in response to a question.

He claims that the sweetener’s price won’t not have crossed the mark of Rs85 per kg, including the sales tax, had the millers plea regarding the start of the crushing season and elimination of the role of the middle men in the purchase of sugarcane been accepted by the government.

In a letter written to Prime Minister Imran Khan on Monday, the PSMA chairman said that increase in sales tax rate from 8pc to 17pc during the year 2019-20 and high interest rate on working capital resulted in the increase in sugar retail price to Rs80 per kg that led to a sugar inquiry.

He said in the year 2016-17 the price of the sweetener came down to a range between Rs45 and Rs55 from Rs90 per kg only because of the surplus stocks.

Denying the sugar mills role in dictating the market rates, the letter said that the millers compete to sell their sugar stocks as early as possible to save interest cost of Rs0.50 per kg per month and thus cannot take the risk of hoarding the commodity in the hope of a hike in its prices.

The retail sugar price had touched Rs120 per kg mark and rather the commodity fell short in the open market during the month of Ramazan when the government tried to sell it at a subsidized rate of Rs68 per kg in Ramazan bazaars.

Published in Dawn, July 28th, 2021