Tractor sales have nose-dived from 300-400 tractors a day to only 10-20 tractors after levy of 16 percent general sales tax (GST) which was exempted from sales tax prior to April 2011. Industry sources told Business Recorder that Pakistan's two premier tractor assemblers, i.e., Millat and A-Ghazi tractors have closed down their assembly lines due to lack of fresh orders.
Tractor is costing the farmer Rs.100,000/= more with the enforcement of GST. Certain quarters are also claiming that the GST will be withdrawn soon and a government committee is looking into the matter. This uncertainty is also hampering tractor bookings as farmers are following wait-and-watch policy and hold back their purchases.
They said tractors produced and sold are parked at the tractor plants in hundreds waiting collection by customers, who are avoiding collection of their purchased tractors in the hope that GST on tractors will be withdrawn
Commenting on the sharp decline in tractor sales, Pakistan Association of Automotive Parts and Accessories Manufactures (PAAPAM) Vice-Chairman, Syed Nabeel Hashmi, said last year approximately 80,000 tractors were produced indigenously with over 90 percent components coming from the local vending industry.
Hashmi lamented that this critical situation would be tantamount to death for 300 strong vending units of Punjab whose entire business depends on tractor sales. This industry houses 15,000-20,000 employees directly and all vendors are registered tax payers. Tractor is the basic farming need, and GST is depriving the already water-starved farmers of this vital tool also.
In addition to tractors the farmers are now paying GST on fertilisers and pesticides also. Such heavy and sudden tax burden on the backbone of Pakistan's economy does not make any sense. If this vital industry is to be saved then the stake holders, i.e., the farmers, assemblers and vendors need to be taken on board by the government to thrash out a plan to keep the assembly line ticking and also broaden the tax net for the government.
Hashmi proposed that GST rate be reduced from 16 percent to 5 percent and gradually increased over a number of years. With the current state of affairs it seems the government is going to lose a lot of revenue. Farmers will not get the tractors they need, and the work force employed by the vendors will be made redundant. It is lose-lose situation for all, but government can make it a win-win situation.