Dejavu for Tractor parts industry in a FBR created crisis: PAAPAM

The tractor manufacturing and parts industry faces a significant crisis, threatening the stability and future of a sector that plays a crucial role in the national economy. With a substantial export value of $20 million, a robust vendor base of 200, and an employment figure reaching 200,000 the industry has achieved an impressive 95% localization.
The imposition of a 10% sales tax on tractors, effective from the budget announcement in June 2024, has exacerbated the situation. Previously, tractors were exempt from sales tax until June 2024, ensuring smooth operations and financial stability for manufacturers like Millat Tractors Limited (MTL). The new tax policy has pushed MTL back into the refund regime, reminiscent of the challenges faced post-2012 when SRO 363 established a refund mechanism that processed refunds efficiently within three months.
In 2022, the introduction of SRO 563 (1)/2022 complicated matters further by imposing conditions on the buyer of tractors. The refund benefit was limited to farmers owning land with valid documentation, excluding many who could not meet these stringent requirements. Since then, despite fulfilling the stipulated conditions, the industry has not received due refunds, causing severe financial strain.
A delegation from the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), led by Chairmen, Mr. Abdul Rehman Aizaz, Senior Vice President Mr. Mumshad Ali, along with Mr. Irfan Qureshi, Mr. Rehan Riaz, Mr. Shahab Saleem, Mr. Jawaid Hafeez, and Mr. Anas Haroon visited the Millat Tractors Sheikhupura Plant to address these pressing issues.
Mr. Abdul Rehman Aizaz and Mr. Mumshad Ali highlighted the urgency of the situation, stating, “Since the budget announcement, the mechanism for processing sales tax refunds has not been notified by the Federal Board of Revenue (FBR) despite numerous letters and appeals. Consequently, MTL operations have been halted since July 1st with no orders or invoices issued, causing significant financial losses as compared to the last Year sales of 30,000 units.
The delegation urges the Ministry of Finance (MOF) to intervene and ensure that the FBR establishes an efficient refund process, similar to the one under SRO 363(i)/2022. The failure to address these issues promptly could have detrimental effects on Pakistan’s agriculture sector, which heavily relies on the timely availability of tractors and related machinery.