Kathmandu, September 21

The import of high-performance tractors has been halted since the beginning of current fiscal year when the Ministry of Finance (MoF) imposed value added tax (VAT) on the machines. The MoF started to impose VAT on tractors with engine capacity of above 1800 cc by amending the Financial Act 2017-18.

After the new government policy went into effect on the first day of the current fiscal, traders have only been importing tractors with engine capacity of below 1800cc, on which VAT is not levied.

Earlier, the government had categorised tractors under ‘agricultural and others’ heading and VAT wasn’t charged during their import.

Traders claim that tractors below 1800cc capacity are unsuitable for agricultural works and farmers normally use machines that have capacity of between 2200cc to 6000cc.

“MoF had assured us that the new rule would be rolled back, but it is still in place even as two months have gone by since the beginning of the new fiscal,” said Kapil Shiwakoti, president of Tractor Committee, NADA Automobile Dealers Association.

However, according to MoF Revenue Secretary Shishir Kumar Dhungana, the new provision has been introduced through the financial act and the government cannot revert to the earlier policy until its amendment.

Until last fiscal, the government used to impose 4.5 per cent customs duty on tractors and excise duty and VAT were exempted.

Owing to the spat related to the new charges at the customs points, around 2,000 tractors imported by 22 traders are gathering dust in the border area. “Traders are currently catering to the demand of high-performance tractors from their stocks,” said Shiwakoti. “If the government does not revert to the earlier policy, the price of tractors will go up by at least 13 per cent (the VAT amount) and the supply of tractors will also likely take a hit.”