KARACHI: Auto manufacturers have asked the government to cut sales tax rate on local and imported parts of tractors.
The Pakistan Automotive Manufacturers Association (Pama), in its budget proposals for the next fiscal year, said tractors are subject to the reduced sales tax rate of 10 percent. Local and imported parts are subject to the sales tax of 17 percent. “Since input tax is much higher as against the output tax, refunds are consistently accruing and increasing on a regular basis,” the Pama said.
The input tax should be brought down to reduce the yearly refunds of Rs400 to Rs500 million. “As sales tax on imports is directly collected by the government at the import stage and no other intermediaries are involved, therefore it is sensible for the authorities to implement (this),” said the association. A Pama official said the industry was badly hit by sales tax in 2011 when rise in prices slowed down the sales of tractors. “The industry has never been able to recover from that blow and now blockage of its huge refunds makes it almost impossible for the industry to continue smooth operations due to cash crunch.”
In 2011, the government levied genera sales tax of 17 percent on tractor sales. On industry’s requests, this was revised down to five percent next year but was raised again to 10 percent in fiscal year of 2012-13 and 17 percent in 2013-14. The rate was decreased to 10 percent in 2014-15.
Tractor sales sharply dropped 51 percent during the last five years. In 2010, the sales figures stood at 70,646 tractors. This went down to 49,125 in 2011 and 64,502 in 2012. Total 41,547 tractors were sold in 2013 and 34,796 in 2014.
