‘Long delay’ in Rs8bn ST refunds: Tractor industry to suspend operations from today: MTL

LAHORE: Long delay in Rs 8 billion sales tax refunds has forced the tractor industry to suspend its operations from today. While talking to Business Recorder high official of Millat Tractors Ltd (MTL) said that they had also informed the Pakistan Stock Exchange (PSX) and all relevant federal ministries in this regard.

He also told that the entire tractor manufacturing industry is now facing a severe liquidity crunch as the industry’s over Rs8 billion sales tax refunds are stuck with the Federal Board of Revenue (FBR) for the last two years.

“The industry is now making a loss on each unit it sells due to accumulating sales tax refunds, which is increasing at the rate of Rs 150,000 — more than its profits — for each tractor it sells,” official says.

The official said how the government could achieve the GDP growth targets by placing the industry on a ventilator. This undue delay in decision making has given a circular effect to the whole vending industry to the grassroots level, forcing them to close down at all.

“The refund amount is Rs 8billion, but the vendors are small entrepreneurs and cannot pull on without their genuine refunds.” The liquidity problem would destroy the largest informal agro sector, which was the backbone of the country, he added.

They appealed to the Prime Minster Imran Khan, Minster Finance & Revenue Shaukat Tarin, Minster for Industries Makhdoom Khusro Bakhtiar and Chairman FBR Dr Muhammad Ashfaq to release sales tax amount of Rs 8 billion stuck up with FBR for over 22 months. This has resulted in to acute financial crises for the tractor industry, and will create shortage of tractors for the upcoming harvesting season. This is contrary to the government’s policy to promote agriculture and food security.

The industry requests that government should immediately order refund of GST pending for the last 22 months enabling them to make payment to their vendor as severe liquidity problem adversely impacting cost of doing business resulting in increase of tractor prices.

Dilating upon the details, the official says that the industry pays 17 per cent sales tax to its vendors from whom it purchases parts. It is allowed to pass on only 5pc sales tax to the buyers and the government is supposed to compensate the rest 12pc.

This differential (which translates into Rs 150,000 per piece) is accumulating and has touched Rs6bn for Millat Tractors Ltd alone. Practically speaking, it means that the factory is making losses on each unit it sells, thus leaving the manufacturer with no choice but to suspend operation and, at least, save it from future losses, he says.

Copyright Business Recorder, 2022