Lahore - After cut in sales tax, the tractor industry now wants low duty on the import of raw material to decrease the cost of production.
“The government’s decision to reduce GST to 5 percent on tractors was a longstanding demand of people attached to tractor industry and farmers alike, which will go a long way towards reviving the industry; thus helping the farmers,” said Mohammad Shahid Hussain, CEO & MD of Al-Ghazi Tractors. He added the industry was now hopeful of a brighter future due to the government’s decision of reducing the sales tax, as it would spur growth and stabilise the ailing industry through increase in sales, securing thousands of jobs.
It is worth adding here that GST rates revisions in the past had been a major issue for the tractor industry. Since the imposition of GST, Pakistan witnessed negative growth in terms of sales of tractors in last five years.
However, he added, the industry had given some further suggestions on related issues, which needed to be addressed in conjunction to make the overall situation for the tractor industry conducive and positive, thus ensuring the desired mechanization level at farms.
“One of those suggestions is the anomaly between input tax and output tax. The new sales tax would create a definite and serious cash flow problems for the manufacturers,” he said, and added, “Agricultural tractors will now be subjected to reduced rate of sales tax at the rate of 5 percent, while against it, imported and locally produced components required for manufacturing of tractors are subjected to sales tax at the rate of 17 percent.”
He added that even CBU imports of tractors were now allowed at 5 percent import duty which was against the norms of industrialization in any country, while raw material import for local tractor production is subjected to 17 percent GST and 10 percent import duty. “This is not only illogical, but also quite contrary to the idea of localization. The local industry on the other hand is often accused of being protected while the situation is quite the opposite
He added that since input tax was obviously and visibly levied at a much higher rate as against the output tax, considerable refunds from the government consistently accrued and increased 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%. This can’t be rational and reasonable,” Shahid remarked.
“The industry is 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 concluded.