The Sindh Chamber of Agriculture (SCA) has recently escalated its concerns to Prime Minister Shahbaz Sharif regarding the significant price hikes in agricultural tractors due to the imposition of a 10% sales tax, with further proposals to increase it to 14%. This move, according to SCA, not only burdens the farming community but also threatens Pakistan’s agricultural output and food security.
Before July 1, 2022, agricultural tractors in Pakistan were taxed at a 5% rate under the Eighth Schedule of the Sales Tax Act, 1990. However, from July 1, 2022, these were moved to the Sixth Schedule of the Finance Act 2022, which initially exempted them from sales tax, aiming to support local manufacturers. Despite this exemption, local manufacturers did not pass on the benefits to farmers; instead, they incorporated the tax exemption into the tractor’s cost, thereby increasing their profit margins.
From July 1, 2024, the government reinstated a 10% sales tax on tractors. Local manufacturers, who had already included the previous 18% tax in the tractor’s price, added this new tax, effectively inflating costs further. there are allegations that manufacturers are lobbying for an additional 4% sales tax, pushing the total to 14%. This move is seen as a direct violation of SRO 563/2022, which was intended to benefit farmers by reducing their tax burden.
The continuous increase in tractor prices directly affects farmers’ operational costs, which could lead to higher food prices or reduced production due to financial strain. with higher costs, farmers might reduce their agricultural output, leading to a potential decrease in food production. This scenario could force Pakistan to import agricultural products, straining foreign exchange reserves.
The SCA has requested the Federal Board of Revenue (FBR) to investigate these practices and reconsider the tax hike. Nabi Bux Sathio, Senior Vice President of SCA, emphasized that the current tax policy not only goes against the spirit of SRO 563/2022 but also jeopardizes the welfare of Pakistan’s agricultural sector.
