Disruption of fertilizer supply feared.

The Federal government has passed a Tax Ordinance on 26th December 2019, which restricts fertilizer companies from claiming input sales tax on retailing of urea to unregistered dealers. This overnight knee jerk action by the Government has very serious implications for the industry and the farmers as 99% of urea dealers are not registered in Federal Board of Revenue (FBR). The law reads "A registered manufacturer shall make all taxable supplies to a person who has obtained registration under this Act failing which the supplier shall not be entitled to claim credit adjustment or deduction of input tax as attributable to such excess supplies to unregistered person". While the intent of the law is appreciated, it has serious business implications. The supply chain of fertilizer across the country would be disrupted badly since registration of existing dealers' network or induction of new dealers is expected to take considerable time.

The loss on account of inability to claim the refund / adjustment on the attributable input sales tax on supplies to the unregistered dealers may lead to uncalled for price hike leading to incremental burden on farmers that is not the desire of industry or Govt. Industry wide impact is expected into Billions of rupees per annum. In the middle of Rabbi season, any disruption of supply of Urea will have serious implications for the wheat crop and endanger the national food security.

On the edge of government policies, the fertilizer industry is already facing the input and output GST imbalance and this new ordinance, which has been enforced without addressing the legitimate concerns of the fertilizers companies, will lead to losses in billions.

Describing the...