FBR Imposes Rs. 1 Million Penalty on Sugar Mills

The Federal Board of Revenue (FBR) has imposed a penalty of Rs. 1 million each on those sugar mills, which failed to install video analytical surveillance (VAS) system at their manufacturing premises by the deadline of January 31, 2021.

Sources told Propakistani that the FBR has taken the enforcement action in line with the directive of the Prime Minister’s office. In this regard, the FBR has also issued instructions from the PM office for necessary penal action against the sugar mills as per law.

The deadline for installation for the said equipment was December 31, 2020 and later the deadline was extended for one month period. The FBR has now taken action against the sugar mills which failed to take necessary measures for the installation of high-tech video cameras at their manufacturing premises by the deadline of January 31, 2021.

Penalty orders have been received by the sugar mills even in cases where the units have already started the process of choosing a vendor for the installation of such equipment. The FBR has started the process of imposing a penalty of Rs 1 million on the said non-compliant sugar mills, sources said.

Leading tax experts are surprised over the move of the FBR for imposing a penalty on the sugar mills at a time when the FBR has issued fresh evaluation criteria for the selection of one vendor to install the video-analytics solution across all manufacturers of sugar in Pakistan. The FBR had sought invitation for bids (IFB) for video-analytics surveillance of sugar production lines under competitive bidding between pre-qualified suppliers.

In order to properly monitor the production and sale of sugar and the attendant sales tax and income tax thereon, the FBR issued SRO 889(I)/2020, dated 21.09.2020 warranting all sugar mills to install video analytical surveillance (VAS) system expecting that the process would be completed before the official onset of the crushing season.

The FBR ran a rigorous process of procurement as enshrined under the VAS Rules, 2020, and pre-qualified/approved seven vendors for supply and installation of the system on sugar factories.

The VAS System, however, has so far been installed only by a few sugar mills and those too are sub-optimal solutions.

Ostensibly, the cost, which under the prevailing rules is to be borne by the sugar mills, has been the key factor towards non-implementation of the VAS System.

Sugar mill-owners, in an apparent effort to cut cost, went around getting demonstrations and quotations from all seven vendors consuming unending time in the process.

Those that went ahead with installation eventually opted for the cheapest and sub-standard solutions.

A relatively small contract size/volume (80 mills only) to be distributed over seven vendors also did not prove enough an incentive for the vendors to aggressively invest in procurement of the systems and install in a timely fashion.

The last deadline, i.e. January 31, 2021 has already expired and it seems unlikely that the system would be installed in a satisfactory manner across the board by all the mills.

The situation warrants a change in approach.

Accordingly, the FBR has been tasked to select and contract one vendor to install the video-analytics solution across all manufacturers of sugar in Pakistan and in the shortest possible time.

The cost is to be borne by the government and the vendor will submit its invoices to the FBR for payment.

For the evaluation of financial proposals, the scoring of presented and compliant financial/price proposals shall be done by the FBR using a mathematical formula.

The total score is derived by simply adding the technical and financial scores together. The vendor with the highest grand total of points will be declared as the most advantageous bid and the FBR shall invite the respective vendor for contract negotiation, the FBR added.

The FBR added that the production of sugar goods, manufactured in Pakistan, shall be monitored through intelligent video analytics (vision analytics) by the installation of equipment including intelligent production line video surveillance using video/vision analytics cameras, sensors, etc:

  • Real-time collection of data that shows production through object detection and object counting;
  • Transmission of data to a cloud-based data management service for storage and archiving of data;
  • Detection of stoppages and production rates;
  • Quantitative analysis of production;
  • Obtaining and safe-keeping of the required data analytics to be used in legal actions.

The vendor shall make sure that all goods used in relation to the bid are new, unused, and of the most recent or current models and that they incorporate all recent improvements in design and materials.

The warranty of all equipment shall remain valid for the period of the contract, the FBR added.

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