Sindh Chamber of Agriculture Opposes Further Increase in Sales Tax Rate on Tractors

Sindh Chamber of Agriculture has approached Prime Minister Shehbaz Sharif against abnormal increases in prices of agricultural tractors for poor farmers with the imposition of a 10 percent sales tax and also opposed the proposed increase of upto 14 percent on tractors. In a letter to the Prime Minister and newly appointed Chairman Federal Board of Revenue (FBR), Nabi Bux Sathio, Senior Vice President of Sindh Chamber of Agriculture Hyderabad, Sindh expressed serious concerns and opposed the further increase in sales tax rate from 10 to 14 percent on these tractors. The chamber informed that before June 30, 2022, the goods were classified under the Eighth Schedule of Sale Tax Act, 1990 and 5 percent sales tax was charged to the agricultural farmers of Pakistan. Thereafter from July 1, 2022, onwards it was brought under the Sixth Schedule in the Finance Act 2022 whereby exemption of sales tax was allowed at Serial No. 170. This exemption in the Sixth Schedule supported the local manufacturers of agricultural tractors in Pakistan. The local manufacturer of tractors did not pass on the benefit of the said facility to the farmers (purchasers of Agricultural Tractors). The local manufacturers had added the exemption amount in the cost of the tractor and made absorbent profits for themselves instead of farmers, Senior Vice President Sindh Chamber of Agriculture stated. From July 1, 2024, the government increased the rate of sales tax to 10 percent. The local manufacturers who had already illegally included the 18% previous tax in the cost of the agricultural tractor have now once more added another 10% in the price, Nabi Bux Sathio stated. Even though they had already included the exempted amount under the Sixth Schedule in their selling prices. It has come to in knowledge of the farmers’ association that the local manufacturer of tractors is using their influence and wishes to further increase the rate of sale tax by an additional 4 percent to bring the sales tax rate from 10 percent to 14 percent, the association alleged. All the above increases of sales tax on tractors are in violation of SRO.563/2022, which was specifically issued to provide maximum benefits to farmers. Under SRO 563/2022, the sales tax has to be reduced for farmers only. This benefit is not given to the farmers and all the price increases will have a direct effect on the increase of agricultural products. This will reduce food production in Pakistan and consequently, Pakistan would spend its foreign exchange to purchase imported agricultural food products. In light of these facts, it is requested that FBR inquire into this matter and save the farmers and the agricultural products of Pakistan and not increase the sales tax for agricultural tractors as this will create a huge burden on the farmers’ community of Pakistan who is already suffering huge problems at present, Nabi Bux Sathio added. In a separate letter to the Prime Minister and FBR Chairman, the Sindh Chamber of Agriculture has also requested Chairman FBR should ensure immediate compliance with the orders of the Federal Tax Ombudsman (FTO), particularly concerning the refund of 5 percent sales tax unlawfully collected by a leading tractor manufacturing company from the complainants, in accordance with the provisions of the Sales Tax Act, 1990. The FBR should establish a transparent mechanism for processing and disbursing refund amounts under Section 67 of the Sales Tax Act, 1990, which was recommended by FTO to ensure that no further delays occur in the issuance of refunds to the complainants who have been unlawfully charged by the said company before June 30, 2023 and delivery was made after July 1, 2022 when sales tax was already abolished and to similarly affected other end consumers who had purchased tractors from the said tractor manufacturing company, it pleaded. The FBR should issue a show-cause notice to the company under Section 11 of the Sales Tax Act, 1990, based on the findings of the audit report submitted by the Large Taxpayer Office (LTO) Lahore, FBR, and proceed with the recovery of over Rs18 billion in alleged tax fraud committed by it, letter of the Sindh Chamber of Agriculture added.