Karachi, September 3, 2024 – Millat Tractors Limited, one of Pakistan’s leading tractor manufacturers, announced on Tuesday that it will continue to restrict its sales until further notice, awaiting clarification from the Federal Board of Revenue (FBR) regarding the sales tax refund procedure and its applicability.
In an official communication shared with the Pakistan Stock Exchange (PSX), Millat Tractors disclosed that while the company will resume production from September 4, 2024, sales will remain on hold until the FBR provides the necessary clarification. This move follows a previous decision made by the company on August 22, 2024, to halt both production and sales due to a sales tax dispute with the government.
The dispute revolves around the difference in the general sales tax (GST) rates applied to tractors and their input raw materials. According to Millat Tractors, the GST on tractors is set at 10%, while the GST on input raw materials is 18%. This discrepancy has resulted in a significant amount of refundable sales tax, creating a continuous stream of refund claims for the company. Despite repeated requests for clarification, the government has not yet issued a clear mechanism for the payment of these refund claims.
In its earlier communication to the PSX, Millat Tractors explained the challenges faced by the company due to the lack of clarity on the refund process. “This is to inform all stakeholders that the general sales tax on tractors is 10%, and the general sales tax on all input raw materials is 18%, resulting in a continuous stream of refunds,” the letter stated. The company further noted that it had been compelled to cease production temporarily due to these unresolved issues.
The ongoing uncertainty surrounding the refund procedure has left Millat Tractors with no choice but to limit its operations, impacting not only the company’s production and sales but also its supply chain and workforce. The decision to resume production on September 4, while continuing to restrict sales, indicates a cautious approach by the company as it awaits further guidance from the FBR.
Industry analysts suggest that the situation highlights broader concerns within Pakistan’s manufacturing sector regarding the clarity and consistency of tax policies. The delay in refund payments and the lack of clear guidelines can create cash flow problems for companies, affecting their ability to operate efficiently and maintain stable market conditions.
As the company and other stakeholders await a resolution, the focus remains on the FBR to provide a prompt and clear clarification on the sales tax refund procedure. The outcome of this issue will have significant implications for the manufacturing sector, particularly for companies like Millat Tractors that are heavily reliant on the timely processing of tax refunds to sustain their operations.
