Two local tractor manufacturing companies reportedly increased the price of tractors by five percent in the wake of the rate of General Sales Tax (GST) was raised to ten percent from five percent effective from January next year.
Sources told Business Recorder that in January this year, the government had reduced GST on tractors to 5 percent, from 16 percent, bringing down tractor prices to Rs90,000. The move was aimed at helping the troubled local industry but tractor manufacturers did not pass on the impact to farmers. “Price of tractors should have been reduced to at least Rs90,000 per tractor but manufactures did not implement the decision of the ECC in its true spirit,” said an official who did not want to be named.
According to a letter of Millat Tractors Limited sent to all banks and departments concerned because of the increase in input cost, it is not possible for the company to maintain the price of Massey Ferguson tractors. Hence, the price of MF-240 has been increased by Rs 30,500 from Rs 610,000 to Rs 640,000 from December 12, 2012 and onward, and price of MF-260 is now Rs 703,000 from Rs 670,000 showing an increase of Rs 33,500 per tractor. The price of MF 385 has been raised to Rs 1,533,000 from Rs 1,460,000 showing an increase of 73,000 per tractor.
However, the above price will not be applicable to the orders received under the Green Tractor scheme Punjab 2012.
Al-Ghazi Tractors Limited has also decided to increase price of different models up to Rs 73,000 from January 1, 2013. The company maintains that inflation rate in the country is soaring day by day accordingly rupee depreciation is also challenging the entire manufacturing sector.
The company, in its letter to the concerned banks and departments said that in view of persistent and unavoidable demand for price increase of components from vendors, selling prices of it”s products will be revised upward from January 1, 2013.
The price of 480 S(55 HP) will be increased by Rs59,000 to Rs649,000 from Rs590,000 whereas 480 Power(55 HP) will be Rs671,000 against Rs610,000 showing an increase of Rs61,000. The new price of Ghazi(65HP) will be Rs720,000(Rs65,500 increase) followed by 640 (75 HP) Rs952,500( Rs 86,500 increase), 640 with Disc brakes(75 HP) Rs 962,500 (Rs87,500 increase), 640 S (85 HP) Rs1,045,000(Rs95,000 increase), 640S with Disc brake ( 85 HP) Rs 1,056,000( Rs 66,000 increase), 55-56(55 HP) Rs726,000(Rs66,000 increase and 60-56 (65 HP) Rs808,500 (Rs73,500 increase).
The sources said Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM) and tractors manufacturers have met with the officials of Ministry of Industries to seek support to keep the GST unchanged, despite the fact that they did not pass on the impact of reduction in GST to the farmers.
However, neither PAAPAM nor the tractors manufacturers succeeded in getting the support of Industries Ministry as the Ministry is furious at the manufacturers for not passing the benefit of reduction in GST to the farmers.
“Government had reduced GST on tractors from 16 percent to 5 percent to help the industry as well as farmers but farmers did not get benefit of the decision. Now GST rate will be revised upward to 10 per cent as per the decision,” the sources continued.
The sources said previously agricultural tractors were not subject to sales tax, under the policy introduced with effect from 11th June, 2008. Consequently, agricultural tractors were available to the farming community at affordable prices. The facility of zero-rating was, however, withdrawn in March, 2011, resulting in substantial increase in prices of agricultural tractors.
The Ministry of Industries, in its summary had submitted the following options for consideration of the ECC: (i) sales tax zero-rating on agricultural tractors may be restored; or (ii) deemed price (say 25-30 percent of the actual price) may be fixed for sales tax purposes, as has been done in the case of sugar and fertilisers; and/or (iii) levy of sales tax may be phased in three to four years, instead of imposition in one go that is at the tate of 4 percent per year.