Tractor makers slam VAT

KARACHI: Local tractor industry urged the government not to impose minimum value addition sales tax on manufacturers as it would increase the input cost and affect consumers.

Kashif Lawai, executive director of AI-Ghazi Tractors Limited said supply of agricultural tractor is already charged five percent sales tax as against input tax of 17 percent payable on local and imported raw materials, resulting in regular monthly sales tax refund claims.

The government, through the Finance Act 2019, introduced amendment into the sales tax law under which sales tax on account of minimum value addition as payable under twelfth schedule would be levied and collected at import stage. The value addition tax under the 12th schedule would not be charged on raw materials and intermediary goods meant for use in an industrial process, which is subject to customs duty of less than 16 percent ad valorem under the First Schedule to the Customs Act 1969. “This additional undue levy will become part of the cost of production for tractor manufacturers as this is only adjustable through monthly sales tax return and no refund is allowed,” Lawai said in a statement.

“Since tractor manufacturers are allowed to import raw material at less than 16 percent duty and covered under the aforesaid exclusion, therefore no such levy shall be imposed at the import stage.” He requested the Member Inland Revenue to resolve the matter at earliest for smooth clearance of raw materials consignment at the port.