ISLAMABAD: The Fertiliser Manufacturers of Pakistan Advisory Council has pushed the government to reduce tax on gas being used as feedstock in order to end disparity between taxes on input and output in the fertiliser industry that has caused accumulation of huge refund claims of Rs13 billion.
Executive Director of the council Brigadier Sher Shah told The Express Tribune that gas being consumed as feedstock constituted 80% of the raw material used for urea production. The fertiliser industry is paying 17% sales tax on the feedstock.
According to Shah, the industry was paying Rs114 per bag in tax on input whereas the tax on output stood at 5%, which amounted to Rs70 per bag. This way, he said, they were facing problems in getting tax refunds that had piled up to Rs13 billion.
He proposed that the government should cut the rate of sales tax on urea in order to end disparity between input and output taxes and avoid the piling up of tax refunds.
Some time ago, a committee was constituted by the prime minister, headed by National Food Security and Research Minister Sikandar Hayat Khan Bosan, which recommended a flat 2% sales tax on all fertiliser sales to ease the burden on farmers.
The fertiliser manufacturers welcomed the restructuring of output tax provided it was matched by a similar reduction in input tax as well.
They say the industry, which is a key contributor to agricultural growth, has been suffering over the years because of a high cost of input.
Gas prices have gone high due to the imposition of gas infrastructure development cess and the industry’s output and products are also subjected to sales tax.
“If no relief is given in taxes, the additional financial costs lead to higher cost of production and resultantly takes the cost of cultivation to an uncompetitive level,” the council said.
It asked the government to come up with effective measures in a bid to reduce the cost of input so that fertiliser prices may be made internationally competitive and the country’s agricultural economy could be developed.
The council underscored the need for reducing the cess and sales tax on natural gas, re-gasified liquefied natural gas and other raw material like phosphoric acid and phosphate rock.
Apart from this, support prices for major crops like cotton, rice, potato and corn should also be announced to have desired impact on the economy and make Pakistan more competitive and sustainable in the international market.
Published in The Express Tribune, April 7th, 2018.