Tractor makers seek rationalised input rates

KARACHI: Tractor manufacturers have demanded the government to rationalise the applicable rates on inputs to reduce the amount of sales tax refunds, a statement said on Wednesday.

A delegation of tractor industry met Haroon Akhtar, special assistant to the prime minister on revenue / minister of state recently and requested him to consider their proposal to rationalise the rate of input tax on the purchase of components by tractor manufacturers to match the output rates.

“This will help the industry reduce yearly refunds to the tune of Rs1 billion. As sales tax on imports is directly collected by the government at the import stage and no other intermediaries are involved, it is advisable for the authorities to implement this measure; avoiding hassle of refund processing,” the tractor industry suggested.

Tractors are subject to sales tax at the rate of five percent, whereas on procurement of required parts, both locally and imported, the sales tax at standard rate of 17 percent is levied; consequently, in one unit of tractor the amount of input tax is always higher than the output tax.

“The outcome is an anomaly on perpetual basis such that refunds are consistently accruing and increasing on a regular basis,” the delegation said. Earlier, Pakistan Automotive Manufacturers Association (PAMA) had requested the government to abolish Customs duty, additional Customs duty, and reduce the rate of input tax on tractors.