Fertiliser industry seeks zero-rated tax regime

LAHORE: The Fertilizer Manufacturer of Pakistan Advisory Council (FMPAC) has demanded zero-rated regime on different taxes including GST and urged for immediate settlement of all pending subsidy claims through budget allocation, which is Rs20.67 billion.

The FMPAC asked for zero-rating of GST for all fertiliser products, including all industrial inputs such as LNG and RNLG, which was currently 12 percent. Similarly, it urged to reduce GST on phosphate acid to zero percent, as its import for DAP production was currently taxed at five percent, while output tax was two percent.

The FMPAC appreciated the relief in terms of reduction of GIDC being considered by the government, which would lead to rationalisation of the cost of production to some extent.

The industry is confronted with serious challenges in terms of sustainability of the business due to delayed subsidy payments, heavy taxation, mismatching input/output taxes and resultant financial difficulties, compounded by the gas curtailments and higher cost of production for SNGPL based plants.

The government has been charging 10 percent GST on rock phosphate (for phosphate fertilisers), while the FMPAC demanded zero-rating on it, and output tax at two percent. “GST on local rock being procured is charged at 17 percent, which is an anomaly/discrimination so SRO C No 5/93-STB/2018/89721-R dated 23-07-2018 Section 13 (iii) shall also be applicable to local phosphate rock and any amendment to zero percent shall also be applicable to local rock,” the FMPAC said.

Sulphur, being a regular input raw material for SSP manufacturing should also be included in this low input GST structure. GST on power and steam used for fertiliser steam manufacturing should be reduced to zero percent, it said.

The FMPAC demanded settlement of outstanding tax refunds, which exceeded Rs21.18 billion till date. It further demanded the government to place the sector in the list of top priority industries alongside exporters for receiving sales tax refunds, given their key role in developing the agricultural economy. Fertiliser import by manufacturers should be brought under normal tax regime, in line with the Fertilizer Policy, 2001, the council said.

The FMPAC asked the government that additional sales tax on import of DAP and other fertiliser by manufacturers be abolished to improve availability and affordability of phosphatic fertiliser, as 15 million tons per year DAP demand was covered through imports.

Furthermore, duty structure and sales tax rates in respect of fertiliser micronutrients be revised and aligned with rates for other fertiliser imports under Chapter 31.

Gas compression infrastructure expenses made by fertiliser industry should be adjusted, and incorporated in the determination of notified gas price for Mari gas and other fertiliser plants. Further, gas compression equipment and machinery should be fully exempted from import taxes and duties to rectify the inequity in laws and to support sustainability of the fertiliser industry.