ISLAMABAD, Dec 10: The government on Monday slashed down the assessment value for the levy of 15 per cent general sales tax (GST) on sugar to Rs21 per kg from Rs24 ex-factory.

Mills will now pay GST at the rate of Rs3.15 per kg to tax department to help the millers to overcome their losses incurred on account of steady decline in the price of the sweetener in the domestic market.

After tax payment, the sugar price arrived at Rs24.15 per kg. After addition of other margins — transportation, wholesales margin — the retail price stood at around Rs26 per kg. However, this price varies city to city or at super stores.

The Federal Board of Revenue (FBR) issued a sales tax notification SRO1195 of 2007 by amending the earlier SRO564 of 2006 directing the sales tax officials to charge the GST on the revised rate of assessment value across the country.

This new policy of a uniform value for assessment of GST was evolved one and half years ago in a bid to remove the possibility of any sudden increase in the ex-factory price of the commodity, which in recent past had surged to Rs44 per kg.

The initial ex-factory price was fixed at Rs33.35 per kg, which was subsequently scaled down to Rs29, Rs25.50 and Rs24 per kg as the price of the sweetener at retail level kept falling in the local market.

A source in the Pakistan Sugar Mills Association (PSMA) told Dawn on Monday that the association had, however, recommended to the FBR Rs20 for assessment of GST on sugar.

He was of the opinion that the millers were still paying Re1 per kg from their own pocket as they were not recovering the actual cost of the commodity.

According to the source, the millers in the Sindh province had started payment of Rs50 instead of Rs67 per 40 kg to the sugarcane growers. The unjust action of the millers had forced growers to stop supply of cane which led to crisis-like situation in the province.

A similar position in the NWFP had delayed the crushing of cane, the source said and added that the millers were reluctant to buy cane at Rs65 per 40 kg. It was not expected that the millers would start crushing at least in the current month as maximum cane would be used for making gur.

The carryover stocks of 0.75 million tons, lying with the Trading Corporation of Pakistan and sugar millers would lift the total production to around 4.5 million to 5.25 million tons.

PSMA representative from Punjab Zaka Ashraf told Dawn that the millers were facing financial problems to clear the last year’s outstanding dues amounting to Rs3 to Rs5 billion to the growers in the Punjab province.

He was of the opinion that depression millers were reluctant to make new investment in the sugar industry which was under depression and forecast that the market would remain depress.

However, he hoped that withdrawal of regulatory duty would help in facilitating export of sugar to Afghanistan to do away with the production glut.

“We have proposed to the government to ban the import of sugar under Afghan Transit Trade (ATT),” he said and added this decision was yet to be implemented as massive Indian origin sugar was flooded in the local market.