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LCCI supports industry ministry’s possible step for GST cut

LCCI supports industry ministry’s possible step for GST cut

LAHORE: Lahore Chamber of Commerce and Industry has welcomed the proposal of Ministry of Industries and Production to bring down General Sales Tax on tractors to 10 per cent from existing 17 per cent and termed it a decision in right direction aimed at strengthening the agricultural 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 GST, the production of tractors had stalled. 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 per cent sales tax and its reduction to 5 per cent during the period) and recovered a bit to produce 51,977 units with 10 per cent sales tax in 2012-13.

The increase in sales tax to 17 per cent 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 were Rs 50,000 and Rs 65,000, respectively. Similarly, in 85 HP category the price increase due to increase in sales tax was 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. Zarai Taraqiaty Bank Limited 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 against 2.31 hp of India. The requirement of 1.4 hp per hectare in Pakistan as recommended by FAO (Food and Agricultural Organization) can be achieved through high volumes of tractor manufacturing industry.

The increase in prices of tractors due to 17 per cent 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 per cent share of the GDP, it has been proposed that the levy of sales tax at 10 per cent may be continued for 2014 as well.