Millat Tractors Limited (MTL), Pakistan’s largest tractor manufacturer, said on Thursday it has ceased production after the government failed to issue mechanism for payment of refund claims.

The company announced the development in its notice to the Pakistan Stock Exchange (PSX).

“This is to inform all the stake holders that GST on tractor is 10% and the GST on all input raw materials is 18% resulting into a continuous stream of refunds.

“The government has not issued any mechanism for payment of refund claims yet, despite MTL seeking clarification. Resultantly MTL is now constrained to stop production till further notice,” read the notice.

Days ago, MTL warned that it may have to shut down operations amid lower sales and refund delays from the Federal Board of Revenue (FBR).

Back then, the tractor manufacturer said it had limited the sales and bookings to only agri-loan customers.

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.