In the new fiscal budget 2023-24, the government of Pakistan has introduced a customs duty on the import of agricultural tractors. The customs duty, ranging from 10% to 15%, is based on the engine power of the tractors. This move aims to regulate and control the import of tractors while also encouraging localized manufacturing in the country.
Customs Duty on Tractors
Tractors falling within the engine power range of 26 kW to 75 kW will be subject to a 15% customs duty. This higher duty rate reflects the government’s intention to deter the import of tractors with substantial power capabilities. It is expected to have a significant impact on the final price of imported tractors in this category. The rationale behind imposing a higher customs duty on these tractors is to promote the utilization of locally manufactured options and reduce dependence on imports.
Customs Duty on Agricultural Tractors
For agricultural tractors outside the engine power range of 26 kW to 75 kW, a customs duty of 10% has been imposed in the Budget 2023-24. Tractors falling into this category will face a relatively lower duty rate compared to their higher-powered counterparts. The distinction in customs duty percentages aims to provide some flexibility and affordability for tractors that may be more suitable for specific agricultural requirements. By imposing a lower customs duty, the government acknowledges the diverse needs of the agricultural sector and seeks to encourage the import of tractors that cater to those needs.
Localization of Tractor Manufacturing in Pakistan
The tractor manufacturing industry in Pakistan has made significant progress in localization, with up to 90% of the manufacturing process being carried out domestically. This localization effort has enabled the country to reduce its dependence on imported tractors and promote self-sufficiency. By encouraging local production, the government aims to boost the economy, create job opportunities, and enhance the quality of domestically manufactured tractors.
Impact of Customs Duty In Budget 2023-24
The impact of customs duty on imported tractors varies depending on whether they are completely built-up (CBU) units or completely knocked-down (CKD) kits. In the case of CBU units, the customs duty will have a more substantial effect on the final price of the tractor, potentially making it less competitive in the market. Conversely, for CKD kits, the impact on prices will be relatively lower due to the high level of localization and indigenization in the local tractor assembly. The majority of tractors available in the market are manufactured locally, thus minimizing the price implications of the customs duty.
