Tractor manufacturers demand tax concessions

Ask govt to eliminate customs duties, reduce input tax

LAHORE: Pakistan Automotive Manufacturers Association (Pama) on Wednesday requested the government to abolish customs duty, additional customs duty and reduce the rate of input tax on tractors.

While submitting proposals for the upcoming budget, Pama stated that due to the above issues, the entire tractor industry was facing a liquidity crunch, which was affecting the trust of foreign investors and shareholders.



Earlier, the Engineering Development Board allowed import of those components which had not been produced in Pakistan for the manufacturing of agricultural tractors at zero customs duty.

However, during fiscal year 2015-16, additional customs duty of 1% on the import of components was imposed by the government. Furthermore, in 2016-17, another 1% customs duty was imposed, taking the total to 2%.

Pama said the levy of duties had contributed to an increase of Rs33 million in the cost over the 12-month period from January to December 2016.

“It is proposed to exempt imports made under SRO 655(I)/2006 and SRO 656(I)/2006 from the additional customs duty,” suggested Pama.

The association added the additional duty on inputs like raw material, components and sub-components of the automotive industry, which were not manufactured locally, had impacted the highly cost-sensitive sector.

“The move will keep prices of tractors within reach of small and medium-scale farmers. The abolition of customs duty and additional customs duty will help the company that has no other alternative besides imports,” it stated.

“This will benefit the entire farming community, suggesting further reduction in the rate of input tax on the purchase of imported components by tractor manufacturers to match the output rate. It will also help the industry in reducing yearly tax refunds by Rs600-700 million,” it added.

Tractors are already subject to 5% sales tax, which has led to the accumulation of tax refunds with the Federal Board of Revenue (FBR), according to Pama.

“Due to this, the entire industry is facing liquidity crunch, affecting the trust of foreign investors and shareholders,” it said.



While giving the rationale behind this suggestion, the association stated that the move would address procedural difficulties in sales tax refund and save the administrative cost of Original Equipment Manufacturers (OEM) and the FBR.

Published in The Express Tribune, April 19^th, 2017.

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