Federal govt plans to raise sales tax on tractors

ISLAMABAD: The federal government is considering increasing the sales tax on tractors from 10% to 14%, a move that could impact the agricultural sector.

This proposed tax hike follows the removal of a previous sales tax exemption on tractors in the 2024-25 budget, which had introduced a 10% sales tax.

Sources from the Federal Board of Revenue (FBR) indicate that the tax authority recently completed a proposal to raise the sales tax to 14%. The proposal is pending Cabinet approval and has already been forwarded to the finance ministry.

The rationale for this increase is that the current 10% input tax is not being fully utilized, and with the standard sales tax rate at 18%, it has led to refunds for the tractor industry. The proposed increase aims to address these refund issues.

Previously, tractors were exempt from sales tax, but the 10% tax was imposed through the Finance Act 2024, effective July 1, 2024.