Govt approves Rs 1.5 billion sales tax subsidy on locally manufactured tractors

July 25, 2020: The government under its Agricultural Fiscal Package has approved Rs 1.5 billion sales tax subsidy on locally manufactured tractors in order to promote mechanization in agriculture sector to enhance per-acre crop output in the country.

The government had announced a fiscal package of over Rs 1200 billion in the wake of COVID-19 pandemic, said a press release issued by Ministry of National Food Security and Research (MinNFS&R) on Saturday.

Out of this package, an amount of Rs 50 billion was earmarked for relief to Agriculture sector.

The Economic Coordination Committee (ECC) in its meeting held on May 13 had approved the proposals submitted by Ministry of National Food Security and Research (MinNFS&R) and were ratified by the Cabinet.

Under the package, sales tax subsidy at rate of 5% to locally manufactured tractors for one year was also approved. At present 5% sales tax is applied on the sale of each tractor.

There are two main manufacturing units in Pakistan including Massey Ferguson and Al-Ghazi having market share of 60% and 40%, respectively.

At present 5% sales tax is applied on the sale of each tractor and annual sale of both the units during 2019 was 41,000 units and average sales tax is around Rs 60,000 per tractor.

Sales tax subsidy to locally manufactured tractors is being offered for one year and the total cost of subsidy is Rs 1.5 billion.

The sales tax subsidy to locally manufactured tractors is for one year and under the implementation mechanism, the Federal Board of Revenue will notify GST subsidy (set aside 5% GST on locally manufactured tractors for one year) and local tractor manufacturers will report to FBR and the Ministry on 5th day of every following month.

The Ministry of National Food Security & Research may ensure through Forensic Audit on quarterly basis to confirm proper utilization of the subsidy for the benefit of farmers.

Area /Jurisdiction & Duration for the Subsidy includes all Pakistan, during the fiscal year 2020-21.

APP