Seed companies demand cut in turnover tax

FBR reviewing the tax but no decision has been taken yet

ISLAMABAD: The Federal Board of Revenue (FBR) is expected to reduce the turnover tax imposed on seed-supplying companies.

Sources pointed out that over 650 local seed-supplying companies were paying 1.25% turnover tax where flour mills and other industries related to agricultural crops were paying just 0.25% turnover tax, which was substantially lower. For other industries, the tax rate is even lower at 0.2%.

If the government decides to reduce the turnover tax for seed suppliers, the cost of producing agricultural crops by the farmers will come down and they will get an incentive to produce more.

According to sources, the Seed Association of Pakistan has asked the government to reduce the turnover tax rate to 0.2%.

Sources in the FBR revealed that the authority was reviewing the turnover tax on seed companies but no decision had been taken yet.

“If a decision is taken on reducing the tax rate, it will still not be cut to the level demanded by the seed association,” a source said.

“Rationalisation of the tax is being considered because the federal government has decided to support the domestic industry supplying quality seeds.”

As Pakistan has an agricultural economy, the government has planned to go for seed import substitution by enhancing the production of seeds in the country.

The sources added that the FBR had received a letter from the seed association, seeking reduction in the turnover tax paid by them.

In the letter, the association argued that the turnover tax was imposed on manufacturing companies whereas the seed-supplying firms did not manufacture anything. “Such companies obtain seeds from farmers and disburse these seeds to other farmers,” the association said.

When Seed Association Secretary General Suleman Aziz was contacted, he acknowledged that the association had sent a letter to the FBR, highlighting the major challenge faced by the seed companies. He added that the association had urged the FBR to hold meetings with the seed companies, which would help the tax bureau understand the issues faced by them.

At present, 600 to 700 local seed companies are working in the country.

“If the government facilitates the seed companies, not only the farmers will benefit in terms of lower crop production cost, the country’s foreign exchange reserves will also be saved,” he said.

Published in The Express Tribune, January 4^th, 2019.

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