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15pc GST imposed on
fertilizer
ISLAMABAD - Pakistan has extended the tax net to include all
farm inputs except tractors, as it imposed 15 per cent General
Sales Tax (GST) on fertilizers Monday through a Presidential
Ordinance.
 The imposition of GST on fertilizers has brought all farm
inputs, except tractors, under the tax net, which has been a
major IMF demand over the last few years. A 15 per cent GST
has also been levied on the raw material used in the
production of fertilizers. The prices of all inputs of the
agriculture sector, which contributes 25 per cent of the
economy, will go up considerably following this decision.
The fertilizers on which 15 per cent GST has been levied on
Monday, include: Phosphatic Rots and Phosphorus; Phosphatic
fertilizer; animal and vegetable fertilizer; mineral and
chemical fertilizers; nitrogen; potassium fertilizers;
ammonium nitrate; sodium nitrate; super phosphate; basic slag;
sivaite potassium sulphate; potassium chloride; calcium
cyanide etc.
The GST on fertilizers has been imposed to meet a major IMF
condition prior to the approval of the fourth and final
tranche under a short-term $596 million Stand By Arrangement
(SBA) agreed in November last year. The IMF Board of Directors
is expected to meet in Washington later this month to approve
a $133 million tranche. This is the first time that Pakistan
has almost completed an IMF programme.
Under the SBA, the government had agreed to impose 15 per cent
GST on all agricultural inputs by September. Although the IMF
wanted the imposition of GST on tractors as well, the
government opposed the demand. The Fund's move was opposed as
the extension of GST to farm inputs at a time when the
agriculture sector was hard hit by drought, had triggered
criticism.
"Instead the government should have given some tax relief to
drought-hit farm sector that posted a (-) 2.5 per cent growth
this year," an agri-economist said. Under the SBA conditions,
the government had imposed 15 per cent GST on pesticides and
nitrogen fertilizer in March. In June the government had
decided to impose GST on rest of the fertilizers but it was
decided that the manufacturers will carry the additional
burden by cutting down on their profits.
Through Monday's Presidential Ordinance, the burden will be
passed on to the consumers that will push the farm input
prices up. "Most of the farm inputs will go out of the small
farmer's reach," the economist said. The cost of farm input
will also increase considerably as the diesel prices have
already gone up. Through a recently introduced petroleum
prices mechanism, to meet another IMF condition, the diesel
prices were increased last week.
"The higher cost of inputs will make life difficult for small
farmers and ultimately the ordinary consumers as they will
have to pay more for the farm output," the economist said. The
agriculture sector, considered backbone of the economy,
employs 44 per cent of the country's workforce in addition to
contributing about 60 per cent shares in the total exports.
Official analysts say whatever happens to agriculture, is
bound to have a substantial impact on the country's overall
GDP growth that posted an unimpressive 2.6 per cent last
fiscal year.
The Sales Tax (Third Amendment) Ordinance, 2001, promulgated
on Monday, introduced an amendment in the Sales Tax Act 1990,
in the Sixth Schedule.
According to the amendment:
a) in serial no 17, the entries relating thereto in
columns (2) and (3) shall be omitted:
b) in serial no 54, the entries relating thereto in
columns (2) and (3) shall be omitted.
Courtesy The Nation, September 4, 2001
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