This is a look at the current trade situation in Pakistan, where the government has imposed a new tax
236-H on all trade bodies in 2024. This tax is being considered oppressive, as it is to be collected by
every trader and distributor and manufacturer from their retailer. In today’s challenging economic
conditions, many traders are already struggling to keep their businesses afloat and are barely managing
to provide for their families. The government of Pakistan enforced this tax without considering its
practical implementation or how it will be collected. For example, if a distributor sells their products to
someone who is a non-filer, a two-and-a-half percent advance tax will be collected from them and if
they are a filer, 0.50% tax will be collected.
This burden is being placed on traders who are already fighting for their survival and are worried about
keeping their businesses stable. Such taxes are essentially the responsibility of the Federal Board of
Revenue (FBR), but this load has been passed on to traders who are working tirelessly to find customers
and improve their business. This tax policy is creating further difficulties for businesses, particularly for
those already facing financial hardships.
In Pakistan, if we talk about fertilizer, it is a crucial field where the prices are determined by both the
government of Pakistan and the companies. Even the MRP is set according to the government and
company rates, and it is strictly monitored throughout the country. For example, the Agriculture
Extension Department monitors these prices, and similarly, representatives of the government in all
provinces oversee the price controls. If anyone tries to sell fertilizer above the government-mandated
price, they face heavy fines, FIRs are launched against them, and in many cases, their stocks are seized.
There have even been instances where agencies have been terminated due to violations.
This shows how strict the monitoring system is for controlling fertilizer prices in Pakistan. It’s important to note that the profit margin in the fertilizer sector is extremely limited. For instance, if a bag of DAP fertilizer is sold for twelve thousand rupees, the margin is only Rs. 150/- to Rs. 175/-, which is approximately a 2% margin. This minimal margin means that the dealer has to cover their investment costs, handling costs, warehousing, as well as support their family Now, as we talk about fertilizer, in the 2024 budget, the FBR has included fertilizer in the same regime where if a fertilizer dealer sells to either a filer or a non-filer, the filer will be charged 0.50% and the nonfiler will be charged 2.50% advance tax under Section 236H. Clearly, this tax has been applied without considering the nature of the fertilizer business and its margins. As we mentioned earlier, the fertilizer business is closely monitored, and if a dealer sells to a sub-dealer or retailer, both must operate within the given margins. The retailer and sub-dealer also have to sell at the government-mandated MRP. If they sell above the MRP, they face the same penalties as dealers, such as fines or even stock confiscation. Thus, it is established that the margin is fixed, and the dealer shares this margin with the sub-dealer. They also cover additional transportation and other costs from this margin and ensure that the retailer sells at the MRP, delivering the fertilizer to the farmer at the nearest place while still managing to support their families.
Another important point here is that the dealer has already fulfilled all tax liabilities under the FBR’s
existing taxes on the two percent margin, such as minimum tax and other applicable taxes like Section
153. The dealer has already paid taxes on this margin, so how can they pay taxes again on the same
margin? Moreover, how can the dealer collect tax from retailers who don’t have taxable income? The
FBR needs to carefully consider and rethink this situation. For the survival of the fertilizer business and
the benefit of farmers and agriculture in Pakistan, it is crucial that taxes on the fertilizer business are
applied according to its nature. If the supply chain of fertilizer is disrupted, it will severely harm Pakistani agriculture and farmers, which in turn will negatively impact the national economy.
Our request to the FBR is that, as an independent body with competent personnel, it should assess
individuals and their income appropriately before imposing taxes, rather than forcing dealers to fight
among themselves and collecting taxes through them. This approach is outdated and foolish, implying
an unwillingness to handle the work directly and instead relying on others, leading to conflicts and
inefficiencies. The All Pakistan Fertilizer Dealers Association welcomes the imposition of applicable taxes
and believes that those liable should pay them. However, the FBR’s department should take
responsibility for registering individuals, assessing their income, and collecting taxes directly. It should
not rely on dealers to fight amongst themselves or attempt to collect taxes from those who are not
liable or whose minimum income does not justify such taxes. This is also a matter of personal freedom
and the survival of businesses. Our appeal is for adherence to the law and constitution, and for everyone to follow the state-prescribed paths. The FBR should do its job, and business professionals should be allowed to conduct their operations so that the country can progress