Fertilizer sector to benefit from massive tax exemption of Rs 252.6 billion in 2022-23

Pakistan’s fertilizer sector has benefited from a huge sales tax exemption of Rs 252.60 billion in the fiscal year 2022-23, mainly due to sales tax exemption on local supplies of fertilizers, Business Registrar reported.

The report shows that the agricultural sector recorded a remarkable growth of 28.1% between 2022 and 2023, according to the new Tax Expenditure Report (2024) released by the Federal Board of Revenue.

The monetary value of agricultural production increased from Rs 14,891.6 billion in 2021-2022 to Rs 19,079.4 billion in 2022-23, leading to a corresponding increase in input costs in the agricultural sector, including higher use of fertilizers.

Fertilizer imports incurred expenditure of Rs 19.9 billion, while local fertilizer production received sales tax exemptions worth Rs 232.6 billion. Overall, the fertilizer sector has benefited from a total concession of Rs 252.60 billion under the Sixth Schedule (Table I) of the Sales Tax Act, 1990, which exempts fertilizers from sales tax.

According to the report, the tax expenditure (exemption cost) for the manufacturing sector, including the fertilizer industry, was calculated at Rs 98.2 billion.