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Govt Plans to Increase Tractor Sales Tax to 14%

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The federal government is considering raising the sales tax on tractors from 10% to 14%. This follows the removal of a previous exemption and the introduction of a 10% sales tax on tractors in the 2024-25 budget.

Sources from the Federal Board of Revenue (FBR) indicated that the tax authority has finalized a proposal for this increase. The proposal is now awaiting Cabinet approval.

The increase is aimed at addressing issues with input tax credits and refunds, as the current 10% rate is not fully consumed. The standard sales tax rate stands at 18%, and the lower rate has led to refund claims within the tractor industry.

The 10% sales tax on tractors was implemented through the Finance Act 2024, effective from July 1, 2024, replacing the previous sales tax exemption.

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