Fertilizer Industry Received Tax Exemptions Worth Rs. 252.6 Billion in FY23

The fertilizer sector benefited greatly from sales tax exemptions worth Rs. 252.60 billion in the fiscal year 2022-23, according to the latest Tax Expenditure Report (2024) issued by the Federal Board of Revenue (FBR). During the same period, the agricultural sector expanded by 28.1 percent while the monetary value of agricultural production was recorded at Rs. 19.079 trillion. However, this growth also led to increased input costs. Local production of fertilizers enjoyed Rs. 232.6 billion in sales tax exemptions during the period in review. The fertilizer sector collectively benefited from a total concession of Rs. 252.60 billion under the Sixth Schedule of the Sales Tax Act 1990. Meanwhile, the manufacturing sector bore the brunt of this tax expenditure, amounting to Rs 98.2 billion. The largest share (43 percent) of expenditure under the sales tax regime was attributed to Petroleum, Oil, and Lubricants (POL) Products, totaling Rs. 1.25 trillion. According to the FBR report, an increase of Rs 327.91 billion was observed in the exemption under the Sixth Schedule for local supplies, mainly driven by the exemption on local fertilizer supply. Overall, the GDP, Large Scale Manufacturing (LSM) sector, and export values witnessed massive growth, while inflation saw a notable increase. The report notes a gradual rise in tax expenditures over the past five years, with income tax expenditures remaining stagnant while sales tax and customs duty expenditures experienced significant growth.