Pakistan Industrial and Traders Associations Front (PIAF) on Tuesday has welcomed the Federal Board of Revenue decision to withdraw two percent additional GST on auto parts and termed it a decision in right direction aimed at strengthening the economy of the country.
PIAF Chairman Malik Tahir Javaid in a statement said the issuance of SRO 896 on October 4, 2013 had caused increase in the tractor prices and resultant decline in their production. He said that before imposition of sales tax, industry achieved a volume of 72,989 during 2009-10. The production declined to 48,898 during 2011-12 (levy of 16 percent sales tax and its reduction to five percent during the same period) and recovered a bit to produce 51,977 units with 10 percent sales tax in 2012-13.
He said withdrawal of two percent additional GST would help increase the government revenue for which the credit goes to the Finance Minister Ishaq Dar and PM Nawaz Sharif. Keeping in view the farmers' purchasing power and increase in prices of tractors, the volume of tractor manufacturing industry is decreased. The present per hectare horse power (hp) availability in Pakistan is only 0.90 against India's 2.31 hp. The requirement of 1.4 hp per hectare in Pakistan as recommended by FAO can be achieved through high volumes of tractor manufacturing industry, he added.
He said tractor industry has seen a drop in volumes by 50 percent in the recent two years, and many part makers are considering closing down their units or changing their facilities for the production of other engineering goods. Erratic and low volumes along with high cost of production are the main reasons for tractor vendors to close their factories.
Malik Tahir Javaid said that at 70,000 tractor production under the five percent GST regime in 2011-12, the revenue collection from the industry and farmers was approximately Rs 7.3 billion, this volume dropped to 50,000 units in 2012-13 under the 10 percent GST regime and the revenue collection stood at Rs 6.8 billion.
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