Millat Tractors Ltd (MTL), a leading tractor manufacturer in Pakistan, has announced a temporary halt in production due to the government’s failure to establish a refund mechanism for General Sales Tax (GST). The company’s decision comes after repeated attempts to seek clarification from the authorities.
In a notification to the stock exchange, MTL explained that the 10% GST on tractors and 18% GST on raw materials have resulted in a significant amount of refund claims. However, the absence of a refund mechanism has left the company with no choice but to stop production.
The impasse has already started to impact MTL’s sales and bookings, with the company limiting its sales to only agri-loan customers. The piling up of completely built-up (CBU) units and squeezing working capital have further exacerbated the situation.
MTL’s production suspension will have far-reaching consequences, affecting not only the company but also its vendors, particularly small and medium-sized enterprises that rely heavily on the tractor industry.
The company’s woes are a symptom of a larger issue plaguing Pakistan’s manufacturing sector. The lack of a clear GST refund mechanism has created uncertainty and hardship for businesses, hindering their ability to operate efficiently.
The government must intervene to resolve the issue and establish a clear refund mechanism to avoid further disruptions to the manufacturing sector.
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