ISLAMABAD: Federal Government has refused to reduce General Sales Tax (GST) on tractors from the existing 10 percent to 5 percent, arguing that the industry earned billions of rupees from farmers instead of passing on the benefit of reduction in GST to them.
Sources close to Chief Executive Officer (CEO), Engineering Development Board (EDB) told Business Recorder that former Deputy Prime Minister Chaudhry Parvaiz Elahi had instructed the Ministry to submit a summary to the ECC for reduction in GST on tractors, but the Secretary Industries did not implement the Deputy PM's instructions and the government completed its term.
An official statement issued by the Ministry of Industries notes that a delegation of Pakistan Association of Automotive Parts & Accessories Manufacturers (Paapam) met Chairman FBR on March 12, 2013 in the Ministry of Finance to request for sales tax reduction from existing 10 percent to 5 percent on tractors. They argued that this support from Government would enhance local production/sale of tractors thus helping the tractor industry to keep its local market share.
Chairman FBR, however, rejected their request on the plea that the present sales tax regime was decided in February 2012 in complete unanimity with all the stakeholders. Therefore, any change in the existing policy framework would require cogent reason and justification.
On the recommendation of EDB, Chairman FBR agreed in principle to release pending sales tax refunds to tractor manufacturers which would help them to overcome their financial and operational difficulties. EDB in this regard has also sent a formal request to FBR. In early months of 2012, the Government reduced GST on tractors to 5 percent, from 16 percent despite opposition by the FBR aimed at bringing down tractor prices by Rs 90,000 and extending help to the troubled local industry. However, the Government decided that rate of GST will be brought to 16 percent in four to five years.