KARACHI: Pakistan Automotive Manufacturers Association (PAMA) has requested the government to reduce the rate of input tax on tractors, which is resulting in liquidity crunch affecting the tractor industry.
The rate of sales tax charged on sales of tractor is 5 percent, as against, components purchased locally as well as imported required to manufacture tractors are subjected to sales tax at the rate of 17 percent. This has resulted in accumulation of legitimate refunds with FBR which currently stands at Rs2.4 billion approximately for the industry. Due to this, the entire tractor industry is facing liquidity crunch affecting the trust of foreign investors/shareholders.
“Presently, Original Equipment Manufacturers (OEMs) have to suffer substantial financial burden due to lengthy reviewing process of FBR and incomplete documents/details submitted by small vendors,” stated Abdul Waheed Khan, DG PAMA.
“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,” he suggested.
“We propose that the sales tax be eliminated or rationalized on purchase of imported tractor component as there is no point of collection of sales tax by Government at the time of import and subsequently giving refund for the same,” said DG PAMA adding that such a change in input tax rate will eventually benefit the farmers community and the entire tractor industry.
