Govt withdraws tax exemption on agri purchases


LAHORE – The federal government, vide its notification on the last day of 2010, has withdrawn the exemption from 3.5 percent withholding tax on the purchase of agriculture produce.
Through this waiver of exemption flour, sugar, pulses and ghee will become costly and the prices of every such product will increase in which agriculture produce is used as a raw material.
Tax expert Shahid Jami has strongly criticised the governmental decision and has said that policy makers pushed the public and business class towards tax revolt. It may be recalled that through the notification SRO 586 of 1991 agricultural produce was exempted from withholding tax. Now after an elapse of 20 years, when the inflation is at the peak, vide the notification SRO 1161, the exemption has been withdrawn where agriculture produce has not been purchased directly from the farmers.
Since most of the buying of agriculture produce is made through commission agent therefore, exemption available to the farmer would be meaningless. Withholding tax at concessionary rate of 1.5 percent is already levied on rice, cotton seed and edible oil which are not considered as agriculture produce, whereas now such agricultural produce which has not undergone any processing withholding tax shall be charged at the higher rate of 3.5 percent. In addition, the commission agent would be forced to pay more tax then their earned commission.
Therefore, withdrawal of such notification is in the interest of both government and the public which has been issued untimely and unwisely.