Govt considers sales tax on tractors in upcoming budget

WEB DESK: In the lead-up to the 2024–25 budget, the government is considering imposing a sales tax on tractors and pesticides, potentially leading to price hikes for these essential agricultural products.

Currently, under the Sixth Schedule of the Sales Tax Act, pesticides and their active ingredients registered by the Department of Plant Protection are exempt from sales tax.

Tractors, including road tractors for semi-trailers, are also zero-rated for sales tax. However, budget planners are discussing the removal of these exemptions and introducing a lower rate of sales tax on both tractors and pesticides in the upcoming fiscal year.

These proposed changes are part of the Federal Board of Revenue’s (FBR) budget proposals, and no final decision has been made.

According to sources, the FBR is considering these measures following recommendations from the International Monetary Fund (IMF), which has urged the government to reduce tax exemptions to increase revenue.

In the current budget (2023–24), tractors and pesticides are exempt from sales tax. However, with the IMF’s recommendation, the FBR is looking to collect an additional Rs30 billion if these exemptions are withdrawn.

This could significantly impact farmers, increasing the cost of agricultural equipment and pesticides and potentially leading to a considerable burden on those who rely on these products.

Although nothing has been finalised, these proposals signal the government’s intent to broaden its tax base to meet revenue targets.

If implemented, this move could have significant repercussions for the agricultural sector, affecting farmers’ costs and potentially leading to higher food prices.

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