Government must review its decision to withdraw sales tax exemption to ensure food security, PKI

by index360

LAHORE: Pakistan Kissan Ittehad is deeply concerned by the proposals in Finance Supplementary Bill 2021, tabled in the National Assembly.

In a statement issued on Monday PKI President Khalid Khokhar said that the withdrawal of sales tax exemption for various crop seeds, agriculture inputs and farm implements will have far reaching consequences for the already struggling farming community, raising their cost of cultivation by 5-10%.

In addition to an increase of input cost, the Finance Supplementary Bill is inconsistent with existing government policy and the country’s food security needs. The 17% sales tax on agriculture implements, cottonseed cake, cottonseed oil, maize, rice canola, sunflower, vegetable and potato seed will directly impact the cultivation cost and put quality seed inputs out of reach of many farmers, he said.

Furthermore, high taxation will increase the price of these commodities to the end consumer and subsequently add to food inflation. It is even more concerning that these taxes come at a time when the government is looking to promote oil seed crops through subsidies to lessen the burden on imports.

In particular, the tax on cotton seed and its derivatives will adversely impact the cotton farmer and its allied industry.

Similarly, maize crop has a major contribution towards the growth of poultry industry, with 70% of grain going into feed. The dairy industry is also highly dependent on the maize crop, with silage requirements increasing by the day. In 2020/2021, almost 130,000 Metric Tons of grain and 80,000 Metric Tons of silage was exported from Pakistan. With the imposition of sales tax on maize seed, the export competitiveness of maize crop will face a major challenge and hurt the livelihoods of farmers, Khokhar added.

Rice and Vegetable seeds also face the same predicament. The additional tax will discourage farmers from adopting high yielding hybrid seeds, resulting in overall productivity loss and food security concerns.

Therefore, the government must review its decision to withdraw sales tax exemption on these key agriculture inputs and provide relief to the farmers during these testing times, Khokhar added.

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