The tax incentive package for agriculture sector covers minimum turnover tax exemption to rice millers for Tax Year 2015-16, reduction in sales tax on agri. machinery, pesticides, seed and exemption from withholding tax to agriculture produces including fish.
Sources told Business Recorder here on Tuesday that the Finance Division has directed the Federal Board of Revenue (FBR) to submit the implementation status of the Cabinet decision on support package for agriculture sector. Most of the tax relief measures have already been implemented through Finance Act 2015.
According to the Finance Division, the Federal Cabinet it its meeting held on September 15, 2015 approved support package for agriculture sector. The said package inter-alia includes tax concessions including reduction in cumulative tax on import/local agricultural machinery from 43 to 9 percent; tax holiday for agriculture delivery chain for three years; reduction in sales tax on agri. machinery, pesticides and seed; exemption from Income Tax for Halal meat production plants, exemption of withholding tax to agriculture produces including fish as well as rice millers exempted from minimum turn over tax for Tax year 2015-16.
FBR is accordingly requested to implement the said decisions of the Federal Cabinet and submit an implementation report for perusal of the Prime Minister, Finance Division added.
In order to provide incentive to the agriculture sector, tax exemption has been granted on import of agriculture machinery through Finance Act, 2015. The details of equipments and PCT code on which exemption has been allowed is mentioned in clause (91) Part IV of the Second Schedule. The agriculture machinery like Tillage and seed bed preparation equipment, Seeding or planting equipment, Irrigation, drainage and agro-chemical application equipment, harvesting, threshing and storage equipment, Post-harvest handling and processing & miscellaneous machinery have been exempted from WHT under section 148 (PCT heading mentioned in the Finance Act, 2015.
Through Finance Act 2015, a new section 236Q was introduced in Income Tax Ordinance 2001. The persons making payment in full or part or by way of advance to a resident person for the use or right to use industrial, commercial or scientific equipment or on account of rent of machinery shall deduct 10% of the gross amount from the payment. The tax deducted or deductible shall be final tax on the income of such resident person. However, certain exclusions have also been provided in sub-section (5) and thus there shall be no deduction under this section pertaining to payment for the agricultural machinery and machinery leased by a leasing company, an investment bank or a Modaraba or a scheduled bank or a development finance institution in respect of assets owned by the leasing company or an investment bank or a Modaraba or a scheduled bank or a development finance institution.
In order to give incentives to the agriculture sector, tax exemption for three years has been granted to the taxpayer deriving profit and gains from industrial undertakings set up between July 1, 2015 to June 30, 2016 and are engaged in operating warehousing or cold chain facilities for storage of agriculture produce. The tax exemption period will start from the month in which industrial undertaking is set up or commercial operations commenced whichever is later. Besides, the said manufacturing units have also been granted exemption of minimum tax under section 113 of the Income Tax Ordinance.
Through Finance Act 2015, in order to encourage new investments in Halal meat production for competing in globally growing Halal meat market and to increase the use of modern and state-of-art machinery and equipment, tax exemption for a period of four years has been granted to a taxpayer deriving profit and gains from the industrial undertakings, set up between 1st July, 2015 to 30th June, 2017 and engaged in Halal meat production and have obtained Halal certification. The exemption from tax will start from the month in which industrial undertaking is set up or commercial operations commenced whichever is later. Besides, the above manufacturing units have also been granted exemption of minimum tax under section 113 and withholding tax on exports under sub section (1) of section 154 of the Ordinance.
Under Customs laws, the FBR said that the customs duty has been reduced to 2 percent on import of agricultural machinery [Sr. No. 1 of Part-I of Fifth Schedule].