Sugar factories benefit from reduced tax demands but require more clarity

The Ministry of Finance has given major relief to sugar factories by clarifying that factories will not be subject to additional income tax for paying higher sugar cane prices to farmers compared to the fair and remunerative price ( FRP) or State Recommended Price (SAP).

The finance ministry’s letter to chief income tax commissioners and income tax directors general on Wednesday will help struggling sugar factories facing financial crisis, actors said. industry adding that relief should be applicable in all cases.

Over the past 30 years, sugar factories paying a higher price to sugarcane farmers compared to FRP or SAP have been hit with additional income tax notices indicating that the additional amount paid to farmers was a profit made by factories.

CBDT clarification

In October last year, the Central Commission on Direct Taxes (CBDT) clarified that no additional taxes would be imposed on factories paying the additional price of sugar cane over FRP or SAP. However, the CBDT decree only mentioned additional tax notices from 2016. The sugar factories demanded that the decree also apply to tax notices issued before 2016.

“Before taking any measures to recover the request, the authorities on the ground are invited to take into account circular n ° 18/2021 of 25 October 2021 and to dispose of pending rectification requests and requests for suspension of demand, if applicable, in the case of sugar mills / cooperative societies. While disposing of the requests for rectification / requests for stay, an adequate possibility of recovery can be granted, ”the ministry said in the letter, adding that the contents of the letter should be immediately made known to all concerned. for strict compliance.

“This circular only sheds light on the earlier clarification of October 25, 2021, which explained the meaning of the word ‘Government’. And this clarification dated October 25, 2021 is applicable for cases subsequent to the year 2015-16. This circular of January 5, 2022 does not say anything about the cases pending before the year 2015-16, ”said one of the main players in the industry on condition of anonymity.

He added, “However, the instructions for giving proper hearing before disposing of the cases and the overall tone and reading between the lines are definitely positive and a little relief for struggling cooperative sweets who spend sleepless nights under the hanging sword. of tax requests since 1992 ”.

According to stakeholders in the sugar industry, the IT department and the sugar factories opposed a tax demand of 9,500 crore and the sugar factories requested the intervention of the Minister of Cooperation Amit Shah in this matter.

Rachel J. Bradford