Bagasse-fired sugar mills: EDB proposes fixed tax

May 04, 2014- BR


The Engineering Development Board (EDB) has proposed to the Federal board of Revenue (FBR) a fixed tax in FY2014-15 budget for sugar mills that are equipped with bagasse-based/self-generation power plants. Sources told Business Recorder here on Sunday that the proposal is related to the imposition of sales tax on captive power generation based on bagasse.

The sugar mills having captive power plants for electricity generation based on bagasse be subjected to a fixed tax on the basis of each plant”s capacity, since some sugar mills have started planning to establish steel furnaces and are not paying sales tax which is around Rs 4,500, which renders their competitors uncompetitive. It is suggested that sales tax be charged from such sugar mills having furnaces established & running on bagasse/self generation, assuring their production @ 75 percent of transformer capacity. In case of shutdown/restart, the same be intimated in writing along with re-confirmation from EDB/PSMA/& FBR and would be subject to monitoring.

The FBR has also received a proposal of the EDB on the impact of changes in sales tax in budget 2012-13 – supply of goods through international tenders. According to the proposal, the manufacturers of engineering goods have informed that in recent amendments in the Sales Tax Act 1990, the status of supply against International Tenders has been shifted from “Zero rating” to “Exempt” by omitting Serial No 4 “Supplies against International Tenders” from the Fifth Schedule (Section 4 of the Sales Tax Act) and by adding the same as Serial No 12 in Table II of the Sixth Schedule under Section 13 of the Sates Tax Act.

The above said amendments has put the local industry at a disadvantage vis-à-vis foreign suppliers as the sales tax paid on import/local purchase of inputs for the manufacture of engineering goods or supply against international tenders, has become part of their cost and adjustment of this sales tax is not allowed under the new scenario thus making the local industry uncompetitive against foreign suppliers. Moreover, said amendments have created an anomalous situation whereby finished goods are now exempted from sales tax while the inputs, to be used for the manufacture of these goods, are not exempted from sales tax. In view of the foregoing, the EDB is of the considered view that immediate remedial measures are required to be taken to restore the previous status so as to provide a level playing field to the local industry, the EBD added.

Courtesy BR

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