Karachi, August 12, 2024 – Millat Tractors Limited (MTL) raised a critical red flag on Monday, warning that the ongoing ambiguity in General Sales Tax (GST) regime could compel the company to halt its production activities.
The stark warning came through an official communication with the Pakistan Stock Exchange (PSX), revealing the severity of the situation facing the prominent tractor manufacturer.
In its statement, MTL addressed recent media reports suggesting a halt in the company’s production of tractor parts. The company clarified that it has not yet ceased operations, and any such move will be formally communicated to the stock exchange. However, the crux of the issue lies in the unresolved GST complexities affecting the company’s financial health.
MTL outlined that the GST on tractors is currently set at 10%, whereas the GST on all input raw materials stands at 18%. This discrepancy has led to a persistent and unresolved stream of refund claims, which the Federal Board of Revenue (FBR) has yet to address with a definitive mechanism for processing these refunds. As a result, MTL is grappling with significant operational challenges.
The company revealed that it has sought clarification from the FBR to alleviate the situation. Despite continuing operations, MTL’s activities are significantly constrained, with sales and bookings restricted primarily to agricultural loan customers. This limitation has led to an accumulation of Completely Built Units (CBUs) and an increasingly squeezed working capital.
“MTL is currently operating under these strained conditions, but the situation is precarious. If the FBR’s delay in providing clarity persists, we may have no option but to consider a production shutdown,” the company stated.
The uncertainty surrounding the GST regime not only impacts MTL but also raises concerns about the broader implications for the manufacturing sector in Pakistan. As the company awaits a resolution, the market will be closely watching for any further developments that could signal a potential halt in operations or other drastic measures.
MTL’s warning underscores the pressing need for regulatory clarity and timely intervention to support the manufacturing sector and prevent disruptions that could have far-reaching economic consequences.
