LAHORE: The Federal Board of Revenue (FBR) passed Statutory Regulatory Orders (SRO) 2305(I)/2022 on December 28 to reduce the additional customs duty levied on both completely built-up (CBU) agricultural tractors and their completely knocked-down (CKD) kits. The additional customs duty has been revised downwards from 35% outlined in SRO 693 (I)/2006 to 15%.
“Its part of the Kissan Package,” says Asim Ayaz, General Manager (Policy) at the Engineering Development Board (EDB). “The aim is to increase the affordability of existing locally manufactured tractors, and any new ones that may enter the market,” Ayaz continues.
What is the Kissan Package?
The Kissan Package is a Rs1,800 billion support package that the Government of Pakistan announced on October 31. The package was part of a series of measures that the Government had taken on the backdrop of the terrible flooding across the summer in Pakistan that had cost the economy roughly $40 billion.
Under the package, the government will give Rs10.6 billion loans to small farmers across the country while small farmers of flood-hit areas would get loans worth Rs 80 billion. In addition to the interest-free and subsidised loans, subsidies will also be given on farm imports such as fertilisers, electricity, seeds, and even tractors.
Now what is SRO 693, and what does it have to do with the Kissan Package?
SRO as mentioned earlier stands for Statutory Regulatory Orders which covers all kinds of government regulations carried out by FBR and different ministries through delegated powers. These include SROs in the health sector, in taxes, in commerce, in energy, in the auto sector, among others.
SRO 693, alongside SROs 655 and 656 form the policy framework that Pakistan adopted after moving from its Deletion Program/Compulsory Localization Policy to the Tariff Based System in 2006 as part of its World Trade Organisation membership. The aforementioned SROs cumulatively comprise the overarching mechanism for levying duties upon automotive imported parts.
SRO2305(I)/2022 has thus reduced the additional customs duty that is levied upon both CBU and CKD imports for agricultural tractors.
What is the impact of this decision
The most immediate impact of the measure will be that it will provide a lifeline to the domestic tractor industry whose current five month sales volume is 52% lower compared to the same period last year.
As to how much of this tax relief the companies pass on to the customers is debatable, particularly given how Millat Tractors, one of the two major tractor manufacturers in Pakistan, is currently embroiled in a conflict with the Office of the Federal Tax Ombudsman over tax fraud as part of a previous Government scheme aimed at the agricultural industry.
This is big step of govt. that kissan will grow up slightly
Other then benefiting the tractor lobby, it will not benefit the farmers. The only thing Pakistan govt knows is to make the people beggars. Instead of upgrading their skill levels by providing technical training, govt distributes money under BISP or Ahsas programs. What will happen when these payments are stopped to people who have become dependent on them? Similarly rice is the only crop where govt does not provide any floor price and we are able to export the same. Why not do this to all crops and instead provide consulting services to farmers to advise which crops to grow, how to increase yields, how to use water, fertilizers, etc.