Under the pressure of tough conditions set by the International Monetary Fund (IMF), the Pakistan Tehreek-e-Insaf (PTI) government is contemplating to withdraw certain exemptions given to farm sector, including reduced rates of general sales tax on seeds, fertilizers and pesticides. The PTI under its manifesto has set a direction to increase farmers' profitability and boost growth rate primarily by enabling cheaper inputs. In that endeavour they even indicated providing smart subsidy to the subsistence farmers.
However, in sheer contrast, the government is weighing different options to withdraw exemptions of reduced rates of sales tax on agriculture inputs including seeds, fertilizers and pesticides. If implemented, according to market insiders, this will lead to significant rise in farmers' input costs and will adversely impact the agriculture sector that has consistently been contributing positively to the national economy. In addition, such a step will further fuel the already staggering levels of inflation prevalent nowadays. The agriculture sector has warned the government against taking any such step, aiming to increase the sales tax burden on farmers. On one hand, poor farmers will be suffered badly due to undue increase in the cost of production while on the other hand the consumers will also face the music because of inflationary pressures in the economy.
It is worth noting that the vast majority of this population of subsistence farmers estimated to be around 5.5 million in number has no alternative source of employment, especially in an economy slowing down as Pakistan's. Any impact on their farm economics would have a direct impact on their ability to feed their families so the authorities should realise that measures to tax agri-inputs would potentially impact the lives of nearly 28 million people.
Agriculture is one of the most critical sectors for Pakistan. It contributes 19 percent of the overall GDP and employs 42 percent of labour force in the country. It has the most far-reaching impact on 125 million of population living in the rural areas and even more important role in food security for the country.
Pakistan's over 60 percent of the farmers are small scale farmers (owning up to 5 acres) who operate on subsistence level and any changes in farm economics significantly impacts their standard of living.
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