The fertilizer industry has asked the federal government to clear its pending refunds of Rs. 57 billion. Out of these refunds, Rs. 19.217 billion are from the subsidy schemes from 2016-2018 and have been pending with the government for the last three years, while the remaining Rs. 38.152 billion are pending under the GST refunds, reported a national daily.
The Fertilizer Manufacturers of the Pakistan Advisory Council (FMPAC) has sent a proposal to the Federal Minister for Finance, Shaukat Tarin, demanding that the sector be provided relief in the upcoming budget through the rationalizing of the general sales tax (GST) for ease of doing business by adjusting the formula of the GST.
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Currently, the fertilizer manufacturers are paying five to 17 percent GST on the input, and are collecting two percent of the GST on the output. This results in approximately Rs. 7 to Rs. 8 billion in the fertilizer sector’s annual unadjusted input sales tax.
The proposal also asked stated the industry has been suffering from cash flow challenges and the pending dues with the federal government are worsening the financial costs.
The FMPAC also said that the prevalent tax regime on the fertilizer supply chain is causing an imbalance between the input and output costs for the industry and is causing a perpetual piling up of the refundable amount of the manufacturers.w
It urged for the allocation of funds for outstanding payments on account of subsidy and GST refunds in the Budget 2021-22, recommending that the reduction in the input GST rates on natural gas and RLNG to zero to reduce the gap between the input and output GST.
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The association also said that while the fertilizer industry charges, collects, and deposits the sales tax on the retail price of all the fertilizer products, the government receives the entire sales tax from the fertilizer supply chain. Therefore, any reduction in the input GST rates will not negatively impact the government revenues.
“The industry is currently paying an input tax of around Rs. 101 to Rs. 144 per bag of urea, which is more than the output GST of Rs. 33 per bag, resulting in GST refund/adjustment of Rs. 68 to Rs. 111 per bag, for natural gas and RLNG-based urea production respectively,” the proposal statement detailed.
The FMPAC also recommended the zero-rating of industrial inputs and commensurate relief on steam and power used for the manufacturing of the DAP and its related products.
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