Sales tax on inputs to hit productivity, warn farmers

LAHORE: The farming community is concerned about government plans to impose sales tax on agricultural inputs in the budget 2024-25. Farmers believe this measure would raise the cost of cultivation, which is already under inflationary pressure and would have far-reaching consequences for the struggling community.

Aamer Hayat Bhandara, a farmer from Pakpattan district, said: “In an economy where farmers are already struggling to attain profitability, this tax burden poses a threat to the sector.” He warned that it would also fuel food inflation, a constant struggle for the common man.

Taxing farm inputs may lead farmers to compromise on product quality, resulting in lower crop yields and potentially impacting crop quality, raising concerns about food security and nutrition.

Sindh Abadgar Board President Mahmood Nawaz Shah lamented that farmers face numerous challenges, including resource scarcity and climate change effects, which are beyond their control. He urged the government to consider ground realities while formulating taxation policies.

He noted that sales tax on farm inputs could also hit export prospects for key crops such as rice and maize.

“We must remember that rice exports reached $3-4 billion, and maize crossed a record $500 million so far in exports during the same period. At this critical juncture, the agriculture industry requires robust government support to enhance exports rather than impeding them,” he added.

Mr Bhandara said Pakistan needs a national-level debate on how to tax the agriculture sector, adding that there must be a mechanism that offers benefits to farmers just like different incentives are delivered to the industrial sector.

He said that after the corn crop losses last season, farmers have again been badly hit by ‘poor decision making’ as they faced a 25 per cent loss on their wheat crop. “If we impose sales tax on farm inputs too, it will further burden the small and mid-size farmers whose economy is already dependent on expensive loans and credits,” he added.

“In an industry where most growers are smallholders, we must consider the genuine challenges and their impact on farmers,” said Naseer Baloch from Multan. “The cost of cultivating key crops has more than doubled over the past three years. Any additional tax will push the farming community towards subsistence-level working, resulting in declining agricultural productivity.”

He stressed the need to strengthen the sector with supportive, enabling policies to boost productivity and begin realising its true potential.