After consultations with the stakeholders, the Finance Ministry has issued a notification of Rs 100 subsidy on each urea bag aimed at keeping its price below Rs 1400 per bag for 2017-18. According to the notification of August 7, 2017, the Federal Government, through the Finance Bill 2017, has reduced the rates of General Sales Tax (GST) of different fertilizers to reduce their price after the phasing-out of fertilizer subsidy scheme 2016-17. Furthermore, in order to keep urea prices below Rs 1400 per bag, the government will provide a cash subsidy of Rs 100 per bag. The scheme will remain in force during FY 2017-18.
The subsidy will be shared by the federal and the provincial governments on 50:50 basis. Provincial governments will deposit 50% of their total share of subsidy upfront in the existing Special Account in State Bank of Pakistan (SBP) or authorise Federal Government for deduction at source. The balance 50% will be deposited after utilization of 80% of the funds initially deposited.
All manufacturers of urea fertilizer registered with the Federal Board of Revenue (FBR) under sales tax regime will be eligible for receiving a subsidy under this scheme. Manufacturers will pack fertilizers according to the design given by the Government showing retail price of Rs 1400 clearly and subsidy marketing monograms.
The notification further elaborates that cash subsidy on urea fertilizer will be claimed after the sale of bagged fertilizer on the basis of Sales Tax Invoice and Sales Tax Returns submitted by the manufacturers. The manufacturers of urea will submit their subsidy claims along with sales tax invoices and Sales Tax Returns to FBR on a monthly basis.
The urea manufacturers will provide to FBR invoice-wise details of the subsidised fertilizer sold specifying names of buyers, NTN numbers, description, number of bags sold and other relevant information as declared in the sales tax returns. Fertilizer companies will also forward this information electronically bifurcating the information on provincial basis, copies of which will also be provided to Ministry of National Food Security and Research (NFS&R) and provincial agriculture departments.
FBR will forward claims along with returns and invoices to Ministry of NFS&R, which will immediately authorise payment of 80% of the amount through SBP, while 20% of the claims will be cleared after third-party validation of the claims by Ministry of NFS&R. Amounts paid will be secured through Indemnity Bond, to be released after a third-party validation. Ministry of NFS&R will ensure that remaining 20% of the claims are settled within 90 days from receipt of Invoices/ returns from FBR, after third party validation, which shall be completed within the given period of 90 days. SBP shall ensure payment of the subsidy claims within 7 working days.
Necessary details comprising names of manufacturers (place of business) quantities, destinations and value, etc., will be maintained by SBP and reported to Ministry of NFS&R, Ministry of Finance and the Provincial Governments.
The scheme will be implemented by Ministry of NFS&R in collaboration with provincial governments and respective agencies. By exercising powers under relevant provincial laws, the provincial governments will be responsible for strict monitoring to ensure that urea is sold at the notified prices and the benefit of subsidy is transferred to the farmers. Provincial governments will also ensure quality and content of the fertilizer.
Manufacturers and provincial governments will ensure wider public awareness about urea prices. They will also launch a media campaign through print and electronic sources for this purpose.
Fines will be imposed on authorised dealers registered with FBR if they fail to meet the performance requirements of the scheme. The manufacturers would immediately cancel the dealership if a dealer or sub-dealer is found to be overcharging and shall be liable to fine of 20% of the total sales receipts.
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