LCCI welcomes proposal to bring down GST on tractors

LAHORE: The Lahore Chamber of Commerce and Industry on Monday Welcomed Ministry of Industries and Production for its proposal to bring down General Sales Tax (GST) on tractors to 10 from existing 17 percent and termed it a decision in right direction aimed at strengthening the agriculture economy of the country.

In a statement issued here, the LCCI President Engineer Sohail Lashari said that due to the levy of 17 per cent General Sales Tax, the production of tractors had stopped. Before imposition of sales tax, industry achieved a volume of 72,989 during 2009-10. The production declined to 48,898 during 2011-12 (levy of 16 percent sales tax and its reduction to 5 percent during the said period) and recovered a bit to produce 51,977 units with 10 percent sales tax in 2012-13.

The increase in sales tax to 17 percent from 10 percent jacked up prices of 50 HP tractors by Rs 45,000. Approximate price increase in other variants, i.e., 60 HP and 75 HP are Rs 50,000 and Rs 65,000, respectively. Similarly, in 85 HP category the price increase due to increase in sales tax is Rs 107,000 which will be borne by the consumers.

Keeping in view the farmers’ purchasing power and increase in price of tractors, the volume of tractor manufacturing industry is decreased. ZTBL had already significantly reduced loans for purchase of tractors since April 2010. Tractors financed by ZTBL declined from 24,596 units in 2009 to 6,455 units in 2013.

The present per hectare horse power (hp) availability in Pakistan is only 0.90 hp per hectare as opposed to 2.31 hp of India. The requirement of 1.4hp per hectare in Pakistan as recommended by FAO can be achieved through high volumes of tractor manufacturing industry.

The increase in prices of tractors due to 17 percent sales tax had made it difficult for farmers to purchase new tractors especially in view of reduction in loans from ZTBL for purchase of tractors resulting in no production by the tractor manufacturing industry. Accordingly, for the revival of tractor industry and to provide an impetus to the agriculture sector, which is the backbone of the economy with 21.4 percent share of the GDP, it has been proposed that the levy of sales tax @ 10 percent may be continued for 2014 as well.