Tractor Industry has hailed the government's decision to reduce sales tax to 5% on tractors, saying that it was a long-outstanding demand of the industry and farmers. According to the industry representatives, the revisions of GST rates had been a major issue for the tractor industry in the past. They claimed that since the imposition of GST, the country had witnessed negative growth in terms of sales of tractors during the last five years.
They said that this reduction would go a long way in reviving the tractor industry thus helping the farmers through increase in farm mechanisation. They further said that the industry was hopeful for its revival following the government's said decision as the same would not only put a positive impact on the growth but also stabilise the ailing industry.
Meanwhile, Mohammad Shahid Hussain, CEO Al-Ghazi Tractors, said that the industry had also given some further suggestions on some other related issues which needed to be addressed to improve overall situation of the industry. He said that the industry's major suggestion is the anomaly between the adjustment of input tax and output tax and added that agricultural tractors would now be subjected of sales tax at the rate of 5% while against it, imported and locally produced components required for manufacturing of tractors are subjected to sales tax at the rate of 17%.
Moreover, he said that even CBU imports of tractors were now allowed at 5% import duty which was against the norms of industrialisation in any country while raw material import for local tractor production was subjected to 17 per cent GST and 10 per cent import duty.
He said that since input tax was obviously and visibly levied at a much higher rate as against the output tax, considerable refunds from the government were consistently accruing and increasing on a regular basis. 'Now CBUs can be imported at 5% while the raw material for local manufacturing in the country is imported at 17%,' he said. 'The industry was already suffering from that GST blow and blockage of its huge refunds, and the GST revision only on tractor sales makes it further difficult for the industry as even more refunds will be accrued, affecting the smooth operations due to cash crunch,' he added.
To solve the above outstanding issue, 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 ailing cash-starved industry to reduce yearly refunds up to Rs 700 million which would enable the manufacturers to innovate further and provide more useful and cost-efficient options to Pakistani farmers,' he added. Shahid urged the government that raw material should be taxed at zero rate or maximum at 5% in line with CBU import.
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