The farming community on Thursday warned that the proposal to impose 15 percent general sales tax (GST) on agri inputs, machinery and equipment at import/local stages would put additional burden of around Rs 50 billion on agriculture sector which would endanger the food security of Pakistan and increase production cost in the farming sector.
The representatives of the farming community raised serious concerns of the RGST on the food security during their presentations on the RGST at the National Assembly Standing Committee on Finance. The farmers categorically termed imposition of the RGST on agricultural inputs/machinery as a major threat to the framing sector due to non-availability of tax adjustment facility in the sector.
Farming community highlighted that reduction of 10 percent in agriculture produce would result in increase in agriculture produce prices by 30 percent and would threaten the food security of 40 percent population of the country already earning less than a dollar per day.
The representative of farmers association also opposed imposition of RGST on 12 input items of agriculture sector and said this would increase the price of food items, minimise the ability of farmers to cultivate and consequently decline in yield. They said that after the imposition of RGST cost of fertiliser would escalate from Rs 820 to Rs 920 and similarity the cost of other inputs. The ultimate impact of tax would be on the prices of food items. They cited the example of other countries that was giving annual subsidy of US $385 billion dollar to the agriculture sector and argued that a law was adopted in 1997 to tax agriculture income. We are paying tax as per that law, they added.
During the committee proceedings, the agriculturists and farming community negated each others point of view, whereas committee members also objected figures presented by both the associations. Both the associations proposed imposition of agriculture income tax as a replacement of Reformed General Sales Tax on agriculture inputs.
Farming community also raised a question before the policy makers that RGST is a consumption tax that is levied on finished products and how the farming community would be able to adjust their tax burden on agriculture produce being raw material and not as finished product. Farmers Association of Pakistan and Crop Protection Association of Pakistan made detailed presentations on the impact of the RGST on the farming sector.
While pleading their cases, Farmers Association of Pakistan (FAP) representatives Hussain Jehanian Gardaizi, Hamid Malhi and Malik Muhammad Ali Khokar informed the committee that RGST is consumption tax and is levied on finished products and agriculture produce is not finished good as it is raw material for industrial sectors or food.
They informed the committee that GST is proposed to be levied on 12 types of agriculture produce, 22 items of dairy and livestock, four functions of storage, 26 types of agriculture machinery 76 types of pesticides and 13 types of fertilisers. They were of the view that on one hand government is encouraging mechanised farming in the country and on the other hand trying to increase the prices of agriculture machinery and implements by imposing 15 percent tax. They also argued that out of a total credit line of Rs 3.2 trillion the agriculture sector is hardly getting 90 billion credit per annum as against the requirement of Rs 800 billion per annum.
They were unanimous that if the government ensures that Rs 800 billion would be available for the agriculture sector as agriculture credit they would be happy to accept RGST on agriculture inputs. In a presentation by Pakistan Crop Protection Association of Pakistan Jamshaid Iqbal Paracha said that agriculture sector spends some 350 billion on agriculture in puts annually ie Rs 30 billion on pesticides, Rs 60 billion on seeds, Rs 200 billion on fertilisers and Rs 30 billion on agriculture machinery and implements, and total impact of RGST on such would be Rs 50 billion per annum.
Wheat price would go up from Rs 1000 per 40 kilogramme to Rs 1100 per 40 kg immediately after imposition of RGST. Similarly, the RGST impact would be 29 percent on imports of agriculture products as per value addition methods at each stage. He presented an overall far size estimates in the committee and informed that farmers having over 1000 acres of land in the country are 1.5 percent of the farming community.
Farmers having 12.5 acres of land are not more than 12 percent and farmers having less than 12.5 acres of land in the country are estimated at 87 percent of the total farming community. He also informed that farmers having 1.5 acres of land in the country are not more than 37 percent of total farmers.
They also pointed out that increase in agriculture in put would compel the farming community to use less than required inputs and it would result in negative impact on agriculture productivity. He demanded the government not to impose RGST on agriculture inputs and proposed that agriculture income tax be imposed.
Pakistan Crops Protection Association (PCPA) said that Pakistan was among three lowest countries as far as consumption of per capita collieries are concerned and imposition of tax RGST would reduce by 10 percent agri production and increase 30 percent cost of food items and wanted agriculture income to be taxed not the inputs, it added.
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