Mohsin Siddiqui (Chief Reporter) 

The federal government is contemplating the imposition of sales tax on tractors and pesticides in the forthcoming budget (2024-25). Currently, under the Sixth Schedule of the Sales Tax Act, pesticides and their active ingredients, registered by the Department of Plant Protection under the Agricultural Pesticides Ordinance, 1971, enjoy sales tax exemption. However, budget makers are contemplating withdrawing this exemption starting from the next fiscal year (2024-25).

While tractors, including road tractors for semi-trailers (Electric Prime Movers), are currently zero-rated for sales tax, the proposal suggests the imposition of a lower sales tax rate on both tractors and pesticides.

It’s important to note that these proposals are part of the Federal Board of Revenue (FBR)’s budget recommendations and are subject to change. The FBR, reportedly acting on the International Monetary Fund (IMF)’s suggestions, has drafted proposals to withdraw tax exemptions for various sectors, including tractors and pesticides.

In the current fiscal year budget (2023-24), the government granted exemptions to these sectors. However, prompted by IMF recommendations, it now seeks to revoke these exemptions to bolster tax revenue from these sectors. If approved by Parliament, the FBR estimates a potential tax collection of Rs30 billion.

However, it’s worth mentioning that this proposed plan may lead to increased prices of tractors and pesticides, potentially burdening farmers significantly.