Tractor industry advises against imposition of MVA tax

Says it will hike input cost, adversely impact end consumers

KARACHI: The local tractor industry has urged the government not to impose Minimum Value Addition (MVA) tax as it will hike the input cost and negatively impact end consumers.

“Presently, the agricultural tractor is applicable to a sales tax at the rate of 5% in addition to input tax payable on local as well as imported raw material at a rate of 17%,” said AI-Ghazi Tractors Executive Director and CFO Kashif Lawai in a statement.

“This results in regular monthly sales tax refund claims.”

In this regard, a clause has been added to Sales Tax Act through Finance Act 2019 which says, “The sales tax on account of minimum value addition as payable under twelfth schedule (hereinafter referred to as value addition tax), shall be levied and collected at import stage from the importer on all taxable goods as are chargeable to tax under section 3 of the act.”

The CEO said that the law excluded charging of value added tax on raw materials and intermediary goods meant for use in an industrial process which is subject to customs duty at a rate less than 16% ad valorem under the First Schedule to the Customs Act, 1969.

“This additional undue levy will add to the cost of production for tractor manufacturers as this is only adjustable through the monthly sales tax return and no refund is allowed,” he said. It is to be noted that AI-Ghazi Tractors imports raw material under various customs tariffs ranging from 11% to 35%.

“However, for all practical purposes, only 1% customs duty is charged at import stage under customs notification SRO-656(1)/2006 allowing approved original equipment manufacturer to import raw material at reduced rates of customs duty to assemble agricultural tractors,” he said.

He was of the view that since the tractor manufacturers were allowed to import raw material at less than 16% duty and covered under the aforesaid exclusion, therefore no such levy should be imposed at the import stage.

He requested member inland revenue to resolve the matter at the earliest for smooth clearance of raw material consignment at the port.

Published in The Express Tribune, August 25^th, 2019.

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