RGST will impact heavily on agriculture sector Farmers accuse govt of adopting double standards ...(Volume 2, Issue 1)

STAFF REPORT MULTAN: The Reform General Sales Tax (RGST) would cast negative effects on the country’s agriculture, which contributes a significant portion of the GDP, as most of the agriculture related items including fertilizers, pesticides and other things used in far4ming are imported and with the implication of 15 percent RGST, these things would increase by 30 percent.

The farming community has raised a question before the policy makers that RGST is a consumption tax that is levied on finished products and how the farming community would be able to adjust their tax burden on agriculture produce being raw material and not as finished product. Agriculture produce is not finished good as it is raw material for industrial sectors or food.

They were of the view that on one hand, the government is encouraging mechanized farming in the country while on the other hand it is trying to increase the prices of agriculture machinery and implements by imposing 15% tax. They also argued that out of a total credit line of Rs 3.2 trillion, the agriculture sector is hardly getting 90 billion credit per annum as against the requirement of Rs 800 billion per annum. They were of the view that if the government ensures that Rs 800 billion would be available for the agriculture sector as agriculture credit they would be happy to accept RGST on agriculture inputs.

“If the RGST is slapped on the farming sector, it would subsequently increase the wheat price from Rs 1000 per 40 kilogram to Rs 1100 per 40 kg. Similarly, the RGST impact would be 29% on imports of agriculture products as per value addition methods at each stage,” representatives of the farming community said.

They also pointed out that increase in agriculture input would compel the farming community to use less-than-required inputs and it would result in negative impact on agriculture productivity.

It is to be mentioned here that the National Assembly panel has already opposed RGST on agriculture sector.

Some committee members were of the view that agriculture sector was paying a number of provincial taxes and it is not justified to further impose taxes particularly RGST on this sector as the country's economy mostly depend on the growth of this sector.

“We are rejecting the RGST on agriculture sector, as it will prove to be damaging for the farmers and will further increase the input prices including fertilizers, pesticide and other important inputs,” they cautioned.

“If the RGST was imposed on agriculture, it would lower its contribution and the fertile lands,” they said and added it would become ‘barren’ due to high input costs.

http://www.technologytimes.pk/mag/2011/jan11/issue01/rgst_will_impact_heavily.php