Millat Tractors Limited (MTL), Pakistan’s largest tractor manufacturer, has signaled that it may have to shut down operations amid lower sales and refund delays from the Federal Board of Revenue (FBR).
The listed company shared the development in a notice to the Pakistan Stock Exchange (PSX) on Monday.
“It is informed that till now MTL has not stopped operations. MTL shall inform the stock exchange if it happens,” the company informed its stakeholders.
“However, in order to clarify further, it is informed that GST on tractor is 10% and the GST on all input raw materials is 18% resulting into a continuous stream of refunds and FBR has not issued any mechanism for payment of refund claims yet,” it added.
MTL informed that it has already sought clarification from FBR in this regard.
“As of now, MTL is continuing with its operations. However, sales and bookings are limited and only being made to agri-loan customers,” the tractor manufacturer said.
“As a result, the CBU (Completely Built Up) inventory is piling up and working capital is squeezing. If this issue persists and FBR delays the clarification, MTL may have to consider the shutdown,” it said.
Industrialists have warned that the tractor manufacturing and parts industry faces a significant crisis, threatening the stability and future of a sector that plays a crucial role in the national economy.
Incorporated in Pakistan in 1964 under the Companies Act, 1913. MTL is principally engaged in assembling and manufacturing of agricultural tractors and multi-application products. The Company is also involved in the sale, implementation and support of IFS applications in Pakistan and abroad.
Last month, MTL said the imposition of a 10% sales tax on tractors, effective from the budget announcement in June 2024, has exacerbated the situation.
The new tax policy has pushed MTL back into the refund regime, reminiscent of the challenges faced post-2012 when SRO 363 established a refund mechanism that processed refunds efficiently within three months, it said back then.