Pakistan Industrial and Traders Associations Front welcomes Federal Board of Revenue’s decision to withdraw 2 per cent additional General Sales Tax on auto parts
Lahore, March 18, 2014 (PPI-OT): Pakistan Industrial and Traders Associations Front on Tuesday welcomed the Federal Board of Revenue decision to withdraw 2 per cent additional GST on auto parts and termed it a decision in right direction aimed at strengthening the economy of the country.
In a statement issued here, the PIAF Chairman Malik Tahir Javaid said that the issuance of SRO 896 on October 4, 2013 had caused increase in the tractor prices and resultant decline in their production. He said that 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 same period) and recovered a bit to produce 51,977 units with 10 percent sales tax in 2012-13.
He said that despite producing the cheapest tractors in the world due to 95 percent local content, tractor assembly units were finding it hard to sell their products due to high rate of GST.
He said that the withdrawal of 2 per cent additional GST would help increase the government revenue for which the credit goes to the Finance Minister Ishaq Dar. He said that the business community also lauds the efforts of the Prime Minister Nawaz Sharif for attaching great priority to economic issues.
Keeping in view the farmers’ purchasing power and increase in price of tractors, the volume of tractor manufacturing industry is decreased. 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.
He said that the tractor industry has seen a drop in volumes by 50% in the recent 2 years, and many part makers were considering closing down their units or changing their facilities for the production of other engineering goods. Erratic and low volumes along with high cost of production are the main reasons are forcing tractor vendors to close their factories.
Malik Tahir Javaid said that at 70000-tractor production under the 5% GST regime in the year 2011-12 the revenue collection from the industry and farmer was approximately Rs 7.3 billion, this volume dropped to 50,000 units in the year 2012-13 under the 10% GST regime and the revenue collection from this sector stood at Rs 6.8 Billion while the negative impact on the rural/urban economy and unemployment was in addition to this.
For more information, Contact:
Pakistan Industrial and Traders Associations Front
110/s Kot Lakhpat Industrial Estate
Phone: (92) 42 5123522
Fax: (92) 42 5123522
Category: General Business News