Islamabad: The government on Tuesday set a new minimum price for sugar to calculate sales tax, a move that will raise the cost of sugar by Rs10 to Rs15 per kilogram. This change is expected to bring in an extra Rs90 billion in taxes each year, helping authorities address a significant revenue gap, reports The Express Tribune.
The Federal Board of Revenue (FBR) issued a new notification on Tuesday that cancels the previous sugar price of Rs72.22 per kilogram used for tax purposes. Under the new regulation, the price will now be revised every 15 days based on the weekly retail sugar price published by the Pakistan Bureau of Statistics (PBS).
The newly fixed price, which will remain in effect until April 15, has been set at Rs126 per kilogram—marking a 75% increase from the previously notified rate. However, officials say some sugar mills were already calculating sales tax based on rates between Rs100 and Rs110 per kilogram.
According to the notification, the new minimum price for tax will be the national average retail price of refined sugar as published on PBS’s Sensitive Price Indicator, minus Rs16 for the relevant 15-day period.
The most recent national average sugar price published by PBS was Rs168.80. With Rs16 subtracted as per the new formula, the minimum price for tax purposes becomes Rs152.80 per kilogram, inclusive of sales tax. This means the FBR will now collect Rs28 in tax per kilogram, compared to the Rs13 to Rs18 previously collected.
The FBR clarified that the new notification replaces a 2021 order that had set the sugar tax base at Rs72.22 per kilogram.
Despite the tax hike, Haroon Akhtar Khan, Special Assistant to the Prime Minister on Industries, said the retail price of sugar should not increase. He explained that previously, the sales tax was applied based on the actual sale price, which varied across regions and mills. He said the new system brings consistency and has been introduced with the agreement of the sugar millers. “I don’t think it will have any effect on the current price of sugar,” he said.
An FBR official said that last year, tax authorities collected Rs118 billion in sales tax from sugar, calculated on prices ranging from Rs72.22 to Rs100 per kilogram. With the new pricing mechanism, that figure is expected to rise by Rs90 billion, reaching Rs208 billion annually.
The notification follows an FBR review that revealed most mills were still paying tax based on the outdated 2021 rate. The official acknowledged that the FBR had also failed to update the price in the past, allowing lower tax payments to continue.
Sugar mill owners, however, disputed the projected revenue increase, arguing that most mills were already paying tax on Rs100 per kilogram. They estimate the real additional revenue will be closer to Rs15–20 billion.
Besides the sales tax, the government also collects a Rs15 federal excise duty on sugar sold to manufacturers and commercial users. This duty generated Rs9 billion in the first nine months of the current fiscal year.
FBR spokesperson Dr. Najeeb Memon confirmed that the new tax system for sugar is now in effect.
The FBR is under pressure to boost collections after falling Rs714 billion short of its revenue target in the first nine months of the fiscal year—even after issuing fewer tax refunds.
The change in sugar pricing is expected to bring in Rs23 billion more in the remaining months of the fiscal year.
Last month, Prime Minister Shehbaz Sharif said the IMF had agreed to lower Pakistan’s annual tax collection target from Rs12.97 trillion to Rs12.33 trillion. Still, officials warn the country may fall short of even the reduced target unless new revenue measures are introduced.
The government also recently set the market sugar price at Rs164 per kilogram—13% higher than when it allowed the export of nearly 800,000 metric tonnes of sugar. This decision allowed millers to benefit from both domestic and international markets. According to estimates, each rupee increase in sugar price gives millers a gain of Rs2.8 billion.
Meanwhile, in a report on trade barriers, the United States Trade Representative criticized Pakistan for its continued use of regulatory notifications like SROs to offer tax breaks and protections to specific sectors. The report noted that while Pakistan promised the IMF it would limit these notifications to emergencies, no end date for phasing them out has been provided.
