Govt likely to with­draw cash sub­sidy on urea sales

Enterprise - - National news -

The gov­ern­ment is likely to end cash sub­sidy on the sale of urea to farm­ers and im­pose a flat 2% sales tax on all fer­tiliser prod­ucts in the up­com­ing bud­get for fis­cal year 2018-19.

At present, the gov­ern­ment is giv­ing a sub­sidy of Rs100 on the sale of each bag of urea to the farm­ers. In the pre­vi­ous fis­cal year 2016-17, the grow­ers got a cash sub­sidy of Rs156 per bag.

How­ever, fer­tiliser man­u­fac­tur­ers ar­gued that the gov­ern­ment had not yet dis­bursed Rs13 bil­lion to them for 2016-17. They re­vealed that the in­dus­try had also sold fer­tiliser to the farm­ers at the sub­sidised rate dur­ing the cur­rent fis­cal year which amounted to Rs12 bil­lion. But the gov­ern­ment has not yet re­leased a sin­gle penny, caus­ing strain on the in­dus­try’s cash flow.

At present, the gov­ern­ment is col­lect­ing 5% gen­eral sales tax on the sale of urea to the farm­ers and a plan is un­der study to re­duce the tax rate to a flat 2% for all fer­tiliser prod­ucts, which the in­dus­try be­lieves will fur­ther ag­gra­vate the re­fund sit­u­a­tion.

At present, there is a mis­match be­tween in­put and out­put taxes. Ac­cord­ing to the stan­dard prin­ci­ple, taxes are higher on fin­ished prod­ucts and are lower on raw ma­te­rial, but the case is re­verse for the fer­tiliser in­dus­try, which has given birth to the re­fund prob­lem.

In a let­ter, the Fer­tiliser Man­u­fac­tur­ers of Pak­istan Ad­vi­sory Coun­cil, a rep­re­sen­ta­tive body of fer­tiliser pro­duc­ers, has con­veyed its con­cerns to the Min­istry of Na­tional Food Se­cu­rity and Re­search sec­re­tary, say­ing it would com­pound mis­eries of the in­dus­try.

The coun­cil pointed out that it had come to know that the gov­ern­ment was con­sid­er­ing re­vis­ing the out­put tax to im­pose a flat 2% sales tax on all fer­tiliser prod­ucts and with­draw the urea sub­sidy.

Though “it is a wel­come step, it will lead to huge fi­nan­cial im­pli­ca­tions for the in­dus­try un­less the gen­eral sales tax on var­i­ous in­puts like gas and raw ma­te­rial is re­duced pro­por­tion­ally,” the coun­cil said in the let­ter.

At present, 10% sales tax is paid on feed­stock and 17% on fuel and other goods.

Apart from these, 5% sales tax is col­lected on urea, Rs70 per bag is col­lected from the farm­ers while Rs123 per bag is paid by the in­dus­try, re­sult­ing in a huge bur­den of re­funds.

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