The Sindh Chamber of Agriculture has formally approached Prime Minister Shehbaz Sharif, expressing grave concerns over the massive increase in agricultural tractor prices, which they attribute to the imposition of a 10 percent sales tax.
The chamber has also opposed a proposed further increase of up to 14 percent.
In a letter addressed to the Prime Minister and the newly appointed Chairman of the Federal Board of Revenue (FBR), Nabi Bux Sathio, Senior Vice President of the Sindh Chamber of Agriculture in Hyderabad, expressed serious concern and opposed the the potential sales tax hike from 10 to 14 percent on tractors.
The chamber highlighted that before June 30, 2022, agricultural goods were classified under the Eighth Schedule of the Sales Tax Act, 1990, with a 5 percent sales tax charged to farmers. However, from July 1, 2022, the Finance Act 2022 reclassified these goods under the Sixth Schedule, granting a sales tax exemption at Serial No. 170, which was intended to support local tractor manufacturers.
Despite this exemption, local manufacturers did not pass the benefits on to farmers. Instead, they incorporated the exemption amount into the tractor costs, resulting in increased profits for themselves, according to Sathio.
From July 1, 2024, the government raised the sales tax rate to 10 percent. Manufacturers, who had already included the previous 18 percent tax in tractor prices, added another 10 percent, further burdening farmers.
The farmers’ association has alleged that local tractor manufacturers are leveraging their influence to push for an additional 4 percent sales tax increase, raising the rate from 10 percent to 14 percent.
These tax increases, the chamber argues, violate SRO.563/2022, which was designed to maximize benefits for farmers by reducing sales tax. The chamber warns that these price hikes will directly impact agricultural production, potentially leading to increased reliance on imported food products.
In light of these issues, the chamber has urged the FBR to investigate and prevent further tax increases on agricultural tractors, which would exacerbate the financial strain on farmers already facing significant challenges.
In a separate letter to the Prime Minister and FBR Chairman, the Sindh Chamber of Agriculture requested immediate compliance with Federal Tax Ombudsman (FTO) orders, particularly regarding the refund of a 5 percent sales tax unlawfully collected by a leading tractor manufacturer. The chamber called for a transparent mechanism for processing refunds under Section 67 of the Sales Tax Act, 1990, to ensure timely disbursement to affected consumers.
Additionally, the chamber urged the FBR to issue a show-cause notice to the company under Section 11 of the Sales Tax Act, 1990, based on an audit report from the Large Taxpayer Office (LTO) Lahore, and to recover over Rs18 billion in alleged tax fraud.
