ISLAMABAD: Punjab has asked the federal government to waive general sales tax (GST) on agricultural inputs in the upcoming budget to achieve agricultural growth and increase farm productivity at affordable prices.

In a submission to the Ministry of Finance, the agricultural department of Punjab wrote that “it is imperative that agricultural inputs are available to farmers at affordable prices”. However, Pakistani farmers were forced to buy inputs at much higher prices when compared to neighbouring countries, the Punjab government said.

The provincial government’s letter pointed out that GST paid on inputs has increased the cost of production as well as commodities. In order to enable Pakistani farmers to compete with farmers of regional countries, it is proposed that the federal government waive off GST on all agricultural inputs. Debit against tax collection should be adjusted by removing all ongoing subsidies schemes worth Rs37.97 billion.

An agricultural department’s data sheet explained that the cost of production of basmati rice in India was Rs901 per 40 kilograms compared to Rs1,371 in Punjab.

In terms of wheat, the production cost in India was Rs763 per 40kg while in Punjab it was Rs912. The production cost of cotton per 40kg in India was Rs1,076 against Rs2,533 in Pakistan. The cost of production of gram in India was Rs1,359 per 40kg against Rs2,037 in Punjab. Likewise, the production cost of onion in India was Rs380 per 40kg and compared to Rs694 in Punjab.

The department argued that GST on fertiliser, tractors, agricultural machinery and oilseeds was still c which rendered local farmers uncompetitive.

Calling for reduction in the cost of production, the Punjab government letter stated that an amount of Rs25.19bn under GST from the fertiliser sector was collected against estimation of Rs45.1bn, while Rs20bn was spent as subsidy on phosphate fertiliser alone which constituted only 20 per cent of total agricultural inputs.

It said that the government on the one hand was trying to facilitate the agricultural sector by giving different subsidies to make it more competitive, and on the other, huge operational and human costs were being incurred to collect GST.

Published in Dawn, May 24th, 2017