Learned from the State Administration of Taxation of the People's Republic of China (SAT), sales of livestock under the business model of “company + farmers” will be exempted from value added tax (VAT) since April 1, 2013.
“Company + farmers” is a business model applied in animal husbandry. The company signed commissioned farming contacts with farmers that the company provided livestock seedlings, feed, veterinary drugs and vaccines (owned by the company) for farmers, while farmers raised livestock and seedlings till finished goods and then delivered them back to the company for its further sale. Under the circumstances, the taxpayers recalling and selling the livestock shall be treated as agricultural producers selling home-grown produces and shall be exempted from VAT.
It is reported that the VAT exemption from sales of livestock for the model mentioned above has limited impact on domestic listed companies; however, it is really a good news for the entire livestock industry chain. Among the A-share listed companies, those taking the business model of company+farmers mainly include Hunan Dakang Pasture Farming Co., Ltd., Chuying Agro-Pastoral Group Co., Ltd., Henan Huaying Agricultural Development Co., Ltd., Shandong Delisi Food Co., Ltd., etc.
According to the national grain and oil price monitoring system, the average market price of wheat has been up to USD402.7/t (RMB2,529.1/t) in the early of Feb. 2013 from USD328.0/t (RMB2,060.1/t) in the early of July 2012, witnessing an increase of 22.7%. Moreover, wheat prices in some regions like Henan Province, Shandong Province, etc. have even increased by over 30% in Feb. 2013 compared with that in July 2012.
The increasing price of wheat not only directly affects the downstream flour enterprises' existence, but also to some extent affects the trend of the general price level and people's life. Some experts believed that the short-term imbalance between supply and demand was the main reason influencing wheat price. In the long-term, to ensure the stability of wheat price still needs increasing subsidies for wheat planting.
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