KARACHI: Tractor manufacturers have urged the government that raw material imports should be taxed at zero-rate or maximum at 5.0 percent in line with CBU import.
Shahid Hussain, CEO & MD of Al-Ghazi Tractors said CBU imports of tractors were allowed at 5.0 percent import duty, while raw material import for local tractor production is subjected to 17 percent GST and 10 percent import duty.
“This is not logical but quite contrary to the cause of localization as well. The local industry on the other hand is often accused of being protected while the situation is quite contrary”.
Tractor manufacturers also hailed the government’s decision to reduce GST on tractors. “The government’s decision to reduce GST to 5.0 percent on tractors was a long outstanding demand of the tractor industry and farmers. This reduction will go a long way in reviving the tractor industry thus helping the farmers through increase in farm mechanization,” said Mohammad Shahid Hussain.
He added that the industry was hopeful of brighter future due to the government’s good decision of reducing sales tax as it would spur growth and stabilize the ailing industry through increase in sales securing thousands of jobs.
“Since the imposition of GST, Pakistan witnessed negative growth in terms of sales of tractors in last five years”.
However, there still is an anomaly between input tax and output tax. “The new sales tax i.e. reduced levy would create definite and serious cash flow problems for the manufacturers. Agricultural tractors will now be subjected to reduced rate of sales tax at the rate of 5.0 percent, while against it, imported and locally produced components required for manufacturing of tractors are subjected to sales tax at the rate of 17 percent,” said Shahid.
Since input tax is obviously and visibly levied at a much higher rate as against the output tax, considerable refunds from government are consistently accruing and increasing on a regular basis.
CEO Al-Ghazi Tractors added that in its budget proposal the local tractor industry had suggested reduction in the rate of input tax on purchase of components (local and imported) by tractor manufacturers to match the output rate.
“The proposal if implemented would help the cash-starved industry to reduce yearly refunds up to Rs700 million which would enable the manufacturers to innovate further and provide more useful and cost-efficient options to Pakistani farmers,’ he added.