Federal Board of Revenue (FBR) Chairman Tariq Bajwa said Wednesday that the government is not considering any proposal to withdraw or reduce sales tax on fertilizes and pesticides as a new incentive package for agricultural sector has already been announced in budget.
Tariq Bajwa informed the Senate Standing Committee on Finance that at present no proposal is under consideration to abolish sales tax on the said items. The FBR is collecting Rs 39 billion from fertilisers and Rs 4.5 billion from pesticides annually. When the committee recommended to National Assembly to withdraw sales tax on fertilisers, Secretary Finance Dr Waqar Masood stated that apparently we do not have any option to consider withdrawal of GST on fertilisers. Sales tax on fertilisers is applicable since March 2011. The withdrawal of sales tax on these sectors would be a new budget proposal which would change the basic taxation structure of the budget if considered.
Tariq Bajwa stated that a major package for the agricultural sector has been announced in the budget (2015-16). The non-adjustable sales tax at lower rate of 7 percent is proposed to be charged on import and supply of agricultural machinery and equipment. Duties and taxes ranging between 28 to 48 percent have been brought down 9 percent on agricultural machinery. Now the minimum customs tariff slab of 2 percent would be applicable on import of agricultural machinery (not manufactured locally).
The new incentive package for agricultural sector revealed that nonadjustable sales tax at reduced rate of 7 percent has been allowed on the import of local supply of agricultural machinery and equipment. To promote farm mechanisation and enhance productivity on adjustable sales tax at reduced rate of 7 percent, instead of existing rate of 17 percent is being imposed. In order to promote farm mechanisation and enhance productivity nonadjustable sales tax at reduced rate of 7 percent, instead of existing rate of 17 percent is being impose.
Responding to a query on reduction in import duties on tractors, Tariq Bajwa said that if we reduce protection to the local manufacturers, it will have consequences on the domestic tractor industry. It is a fact that world's cheapest tractors are manufactured in Pakistan due to tariff protection. It would be appropriate to refer the proposal of tariff reduction on imported tractors to the Standing Committee on Industries due to the involvement of local industry.
In order to bring retailers into tax net, Chairman FBR Tariq Bajwa told the committee that the tax machinery would have to work hard for four to five years to bring the retailers into tax net. He said that the government brought certain changes in sales tax regime in the last budget whereby certain tiers were introduced to bring air conditioned, chain stores and electricity users exceeding bill of Rs 50,000 were aimed at bringing into tax net.
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