Govt approves Rs1.5bn sales tax subsidy on locally manufactured tractors

ISLAMABAD: The government, under its 'agricultural fiscal package', has approved Rs1.5 billion sales tax subsidy on locally manufactured tractors in order to promote mechanisation in the agriculture sector and to enhance per-acre crop output in the country.

"The government had announced a fiscal package of over Rs1,200 billion in the wake of Covid-19 pandemic, of which an amount of Rs50 billion has been earmarked for relief to the agriculture sector," said a statement issued by the Ministry of National Food Security & Research on Saturday.

The Economic Coordination Committee (ECC), in its meeting held on May 13, had approved the food ministry proposals, which were subsequently ratified by the cabinet.

Under the package, a one-year sales tax subsidy to locally manufactured tractors would be ensured. At present, 5pc sales tax is applied on the sale of each tractor.

It may be noted that there are two main manufacturing units currently operating in Pakistan, namely Massey Ferguson and Al-Ghazi, having a market share of 60pc and 40pc, respectively. The annual sale of both units was 41,000 units in 2019, while the average sales tax is around Rs60,000 per tractor.

Under the subsidy implementation mechanism, the Federal Board of Revenue will notify the GST subsidy (set aside 5pc GST on locally manufactured tractors for one year) while local tractor manufacturers will report to FBR and the ministry on the 5th day of every month.

The food ministry may ensure through the forensic audit on a quarterly basis to confirm proper utilisation of the subsidy.