KARACHI: Millat Tractors Ltd (MTL) has announced a suspension of tractor production until further notice due to the government’s failure to establish a mechanism for processing refund claims.
In a stock filing on Thursday, MTL disclosed that while the general sales tax (GST) on tractors is 10 percent, the GST on input raw materials stands at 18 percent, leading to ongoing refund claims. Despite requests for clarification, the government has not provided a solution, forcing MTL to halt production.
Previously, on August 12, MTL had reported limited sales and bookings, primarily to agri-loan customers, resulting in an accumulation of completely built-up (CBU) units and a squeeze on working capital.
MTL also warned that continued delays in GST refunds by the Federal Board of Revenue (FBR) could lead to a potential plant shutdown. In July, MTL assembled 979 units and sold 605, a decline compared to 1,506 assembled and 1,656 sold in July 2023. For FY24, the company assembled and sold 30,187 and 30,203 units respectively, up from 19,097 and 18,622 units in FY23.
The production halt is expected to adversely affect numerous auto part vendors, particularly small and medium-sized businesses that rely exclusively on supplying parts to the tractor industry.
