Tractor imports have come to a halt in the country after the government brought the vehicle into the value added tax (VAT) network.

The latest Financial Act says imports of all kinds of tractors, except power tillers of up to 1,800cc in capacity, will be subject to VAT of 13 percent. Because of this, tractors imported mainly from India are stranded at customs offices in Biratnagar, Birgunj, Bhairahawa and Nepalgunj.

“Not even a single tractor has been released from the customs office in Biratnagar for the last five days,” Shree Hari Manandhar, an importer of Eicher vehicles, said. The situation is the same in Birgunj, according to Sandeep Mahata, an importer of Swaraj vehicles.

Previously, all kinds of tractors were exempt from VAT and importers had to pay a duty of only 5 percent to import the vehicle.

The latest decision is expected to hit those engaged in agricultural sector because VAT is a consumer tax, which traders pass on to end consumers. “The government’s decision to rope in tractors into the VAT regime will push up cost of each tractor by Rs130,000 to Rs150,000,” Om Sharma of Mahabir Automobiles, which resells tractors of Swaraj brand, said.  This will hit farmers the most, Kedar Thapa, president of the Farmers’ Association Morang, said.

The country imports around 7,000 tractors, with average capacity of 3,500cc to 3,600cc, per year for agricultural purpose.

“The decision to impose VAT on tractor imports comes at a time when agricultural labourers are in short supply because of growing overseas migration. And in this age, nobody uses ox to till the fields,” said Thapa, expressing disbelief over the government’s policy to trim concession extended to farmers.

The government, according to traders, however, has said that VAT was imposed on tractors “by mistake” and the decision would be “rolled back soon”. A high-ranking official of the Ministry of Finance said that the matter was being discussed.

“Because of this, we haven’t released tractors stuck at customs offices,” said Mahata.

However, reliable sources told the Post that the government had imposed VAT on tractor imports after finding that vehicles imported in the name of farmers were being used for purposes other than agricultural. “Tractors imported for farming purpose are increasingly being seen in factories and on highways to ferry other commercial goods. Hence, the tax,” the source said, adding, “Because of these reasons, customs duty on imports of tractors was previously raised to 5 percent from 1 percent.”