LAHORE: The Lahore Chamber of Commerce & Industry (LCCI), endorsing the demand of the Pakistan Hi-Tech Hybrid Seed Association (PHHSA), has urged the federal government to withdraw levy of 17 percent sales tax on agricultural seeds in the forthcoming budget as this may result in sharp decrease in Pakistan’s agriculture yield and exports.

“Agriculture together with agro-based products fetches around 80% of the country’s total exports earnings. Pakistan is in direct competition with the top agricultural produce exporting countries of the world and levy of sales tax on agricultural seeds will lower down our national per acre yield and exports,” said the LCCI Senior Vice President Mian Rehman Aziz Chan in a letter to the Prime Minister Mian Shehbaz Sharif.

He recommended the government to rescind the amendments brought by the Finance (Supplementary) Act, 2022 in the larger economic interest of the overall economy of the country.

It may be mentioned here that PHHSA President Shahzad Ali Malik in an earlier letter to the government and other stakeholders said since local supply of agricultural produce is currently exempt from sales tax under S.No.10 or Table-2 of the sixth schedule to the Sales Tax Act, 1990, producers of agricultural items will not be able to adjust input tax paid on agricultural seeds and the same will be passed through to the growers and consumers. According to the most conservative estimate, levy of sales tax on agricultural seeds will result in approximately 20% increase in the prices of all essential crops.

He was also of the view that this sales tax would force farmers and growers to use their own home grown low-quality farm saved seeds to save costs and yield will be low.

Similarly, he said levy of sales tax is unlikely to have any meaningful impact on revenue collection as it will lead to growth of the informal sector which will result in an increase in the sale of undeclared, undocumented and untaxed seeds, and encourage unfair competition.

More than 42% of Pakistan’s labour force is engaged in the agricultural sector, levy of sales tax will reduce employment opportunities in the sector. While it may also have adverse impact on the prices of seeds and quality of agricultural produce which will jeopardize local R&D and production of Hi-tech Hybrid Seeds and severely impact the growth of Hi-Tech seeds, R&D and transfer of technology.

The Association was also of the view that it would jeopardize envisioned investment opportunities in the agriculture sector and act as a disincentive for Chinese investors in relation to their planned investment in CPEC Phase-II having major focus on China Hybrid Agriculture Model and transfer of technology.

Copyright Business Recorder, 2022