PAMA calls for reducing input tax rate on tractors

KARACHI: Pakistan Automotive Manufacturers Association (PAMA) has requested the government to reduce the input tax rate on tractors, which is resulting in a liquidity crunch affecting the tractor industry.

The rate of sales tax charged on sale of tractors is 5 per cent.  Moreover, the components purchased locally as well as imported which are required to manufacture tractors are subjected to a sales tax at the rate of 17 per cent.  This has resulted in an accumulation of legitimate refunds with Federal Board of Revenue (FBR) which currently stand at approximately Rs2.4 billion for the industry. Due to this, the entire tractor industry is facing a liquidity crunch affecting the trust of foreign investors and shareholders.

“Presently, Original Equipment Manufacturers (OEMs) have to suffer substantial financial burden due to the lengthy reviewing process of FBR and incomplete documents and details submitted by small vendors,” stated PAMA DG Abdul Waheed Khan.

“As sales tax on imports is directly collected by the government at the import stage and no other intermediaries are involved, therefore it is advisable for the authorities to implement this measure; avoiding the hassle of refund processing,” he suggested.

“We propose that the sales tax be eliminated or rationalised on the purchase of imported tractor components as there is no point in collection of sales tax by government at the time of import and subsequently giving refund for the same,” said PAMA DG adding that such a change in input tax rate will eventually benefit the farmer community and the entire tractor industry.

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