Tractor manufacturers are hopeful that the applicable rates on inputs would be rationalized to reduce the amount of sales tax refunds.
 
A delegation of tractor industry met with Mr. Haroon Akhtar, Special Assistant to Prime Minister on Revenue / Minister of State recently and requested him to consider their proposal to rationalize the rate of input tax on purchase of components by tractor manufacturers to match the output rate.
 
“This will help the industry to reduce yearly refunds to the tune of Rs. 1 billion. As Sales Tax on imports is directly collected by the government at the import stage and no other intermediaries are involved, therefore it is advisable for the authorities to implement this measure; avoiding hassle of refund processing,” suggested the tractor industry to the Special Advisor.
 
It is worth adding here that agricultural tractors are subjected to sales tax at the rate of 5% whereas on procurement of required parts, both locally as well as imported, sales tax at standard rate of 17% is levied; consequently, in one unit of tractor the amount of input tax is always higher than the output tax.
 
‘The outcome is an anomaly on perpetual basis such that refunds are consistently accruing and increasing on a regular basis,’ informed the delegation to Haroon Akhtar.
 
Earlier, Pakistan Automotive Manufacturers Association (PAMA) had requested the government to abolish customs duty, additional customs duty, and reduce the rate of input tax on tractors.