Tuesday, July 5, 2022

Tax can cause the price of urea to rise

Fertilizer industry stakeholders said they will be forced to raise prices if the 2021-22 budget does not address long-standing issues relating to the sales tax regime, subsidy non-payment, and delay in releasing the tax sales refund.

Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) Chairman Tariq Khan sent a letter to Finance Minister Shaukat Tarin and pointed out that stuck tax refunds had caused cash flow challenges for farmers. manufacturers.

“The mismatch between the general sales tax on inflows and outflows has resulted in repayable debts of over Rs 38 billion,” the letter states. “Currently, the industry is paying a purchase tax of Rs100-186 on a bag of urea, which is four to five times the production tax of Rs33 per bag for the production of natural gas and RLNG based fertilizer.”

If the Federal Board of Revenue (FBR) does not harmonize the sales tax regime before the budget is approved by parliament, the fertilizer industry will be forced to pass on the impact of the increased financial cost to farmers in the form of higher urea prices, he stated.

“We call on the finance minister to issue guidelines to the authorities to expedite the settlement of outstanding subsidy claims through the Ministry of National Food Security and the Ministry of Industry and Production through the issuance of negotiable bonds,” he said.

Moreover, Khan offered FMPAC’s support to the government to guide the documentation of the savings and stressed that the council was ready to share information about resellers not registered with FBR.

In line with this commitment, the fertilizer industry has actively encouraged its dealers to register with FBR and has restricted business with unregistered dealers.

“However, progress in recording sales tax has remained slow since the demise of dealers,” he said. “In the absence of any specific exemption from Section 21(G) of the 2001 Income Tax Ordinance, sales to unregistered retailers will remain restricted, which could impact agricultural production and threaten national food security.”

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