ISLAMABAD              -        The government, under its Agricultural Fiscal Package, has approved Rs1.5 billion sales tax subsidy on locally manufactured tractors in order to promote mechanisation in agriculture sector to enhance per-acre crop output in the country.

The government had announced a Fiscal Package of over Rs 1200 billion in the wake of Covid-19 Pandemic. Out of this package, an amount of Rs. 50 billion was earmarked for relief to agriculture sector. The Economic Coordination Committee (ECC), in its meeting held on 13-5-2020, approved the proposals submitted by Ministry of Food National Food Security and Research (NFS&R) and were ratified by the Cabinet vide Cabinet Division’s on 19th May, 2020.

Under the Fiscal Package for Agriculture, sales tax subsidy @ 5 percent to locally manufactured tractors for one year is being provided. At present 5 percent sales tax is applied on the sale of each tractor. There are two main manufacturing units in Pakistan viz. Massey Ferguson and Al-Ghazi having market share of 60 percent & 40 percent, respectively. At present 5 percent sales tax is applied on the sale of each tractor.

Annual sale of both the units during 2019 was 41,000 units and average sales tax is around Rs.60.000 per tractor. Sales tax subsidy to locally manufactured tractors is being offered for one year. The total cost of subsidy is Rs.1.5 billion .Annual sale of both the units during 2019 was 41,000 units and average sales tax is around Rs.60.000 per tractor. Sales tax subsidy to locally manufactured tractors is for one year.

Implementation Mechanism includes Federal Board of Revenue will notify GST subsidy (set aside 5% GST on locally manufactured tractors for one year). Local tractor manufacturers will report to FBR and the Ministry on 5th day of every following month. Ministry of National Food Security & Research may ensure through Forensic Audit on quarterly basis to confirm proper utilization of the subsidy for the benefit of farmers. Area /Jurisdiction & Duration for the Subsidy includes all Pakistan, during the fiscal year 2020-21.

Earlier, the tractors sales were down in the country.  The sales of tractors and the industry sold only 1843 units in May as compared to 3599 units the same month last year.

A tractor dealer in Hyderabad, Sheikh Waqas, while commenting on the situation, said that the sales of tractors was stagnant for the last month as the buyers were anticipating a price cut. He said that two major companies undertook sales activities and announced different promotional schemes to help out the farmers, as the upcoming crops direly need farm machinery to boost yields, especially, when output is threatened by current locust attack. “Now the sales of tractors are gradually picking up,” he added.