Budget 2018: PAMA urges government to reduce input tax rate on tractors

Pakistan Automotive Manufacturers Association (PAMA) has proposed the government to reduce the rate of input tax on tractors in next budget. In its budget proposal for financial year 2018-19, the PAMA said that the rate of sales tax charged on sales of tractor was 5%, as against, components purchased locally and imported as well and the manufacturers were required to pay sales tax at the rate of 17%.
This has resulted in accumulation of legitimate refunds with FBR which currently stands at Rs 2.4 billion approximately for the industry. Following the said issue, the entire tractor industry is facing liquidity crunch affecting the trust of foreign investors/shareholders.
"Presently, Original Equipment Manufacturers (OEMs) have to suffer substantial financial burden due to lengthy reviewing process of FBR and incomplete documents/details submitted by small vendors," said Abdul Waheed Khan, DG PAMA.
"As sales tax on imports is directly collected by the government at the import stage and no other intermediaries are involved, therefore it is advisable for the authorities to implement this measure; avoiding hassle of refund processing," he suggested. "We propose that the sales tax be eliminated or rationalized on purchase of imported tractor component as there is no point of collection of sales tax by government at the time of import and subsequently giving refund for the same," he said; adding that such a change in input tax rate will eventually benefit the farmers community and the entire tractor industry.