Millat Tractors Limited (MTL), Pakistan’s largest tractor manufacturer, has announced the suspension of its production operations, citing the government’s failure to establish a mechanism for processing GST refund claims. The decision was formally communicated to stakeholders through a notice issued to the Pakistan Stock Exchange (PSX) on Thursday.
The company highlighted that while the Goods and Services Tax (GST) on tractors is currently set at 10%, the GST on input raw materials stands at 18%, leading to an ongoing accumulation of refund claims. Despite repeated requests for clarification from the Federal Board of Revenue (FBR), no procedure for refund payments has been provided, compelling MTL to halt production until further notice.
This development follows a warning issued by MTL just days earlier, indicating the possibility of a production shutdown due to declining sales and delayed refunds from the FBR. At that time, the company had already limited its sales and bookings exclusively to agricultural loan customers.
The situation has raised alarms within the industrial sector, with experts cautioning that the crisis could severely impact the tractor manufacturing and parts industry. This sector is vital to Pakistan’s economy, and its instability poses a significant threat to future growth.
Incorporated in 1964 under the Companies Act of 1913, Millat Tractors Limited is principally engaged in the assembly and manufacturing of agricultural tractors and multi-application products. The company also provides sales, implementation, and support services for IFS applications both domestically and internationally.
The recent imposition of a 10% sales tax on tractors, effective from the budget announcement in June 2024, has exacerbated MTL’s challenges. The company noted that this new tax policy has forced it back into the refund regime, reminiscent of the post-2012 period when SRO 363 introduced a refund mechanism that processed claims efficiently within three months.
As MTL navigates these financial and operational hurdles, the broader implications for Pakistan’s agricultural and industrial sectors remain a significant concern. The company’s stakeholders and industry experts alike are calling for immediate government action to address the refund issue and prevent further disruption in the sector.
