Tractor-makers seek import tax abolition

Lament sales tax refunds are not being released timely

LAHORE: Al-Ghazi Tractors Limited (AGTL) has requested the Federal Board of Revenue’s (FBR) anomaly committee to end general sales tax (GST) at the import stage, which is resulting in liquidity challenges and considerable financial cost for the tractor industry.

In a letter sent to the committee, the company pointed out that due to the liquidity crunch faced by the government, sales tax refunds of the industry were not being released timely ie within three days of the claim sanctioned. Instead, the refunds were being disbursed in tranches with delays spanning several months, the letter said.

“As of today, more than Rs5 billion of the tractor industry is stuck with the FBR,” it stated. “The company is currently facing liquidity issues and a huge financial cost due to Rs2.3 billion worth of non-refunded sales tax,” said AGTL CEO Shahid Hussain.

Crisis-hit tractor industry shifts focus to exports

Currently, the output sales tax is charged on the sale of tractors at 5% against 17% input tax paid on purchase of components, local as well as imported. Accordingly, the tractor assemblers are supposed to claim sales tax refunds, which accumulate every month. “Hence, it is proposed to abolish GST at the import stage on completely knocked down (CKD) components imported by tractor original equipment manufacturers (OEMs) for local assembly of tractors,” he said.

The CEO argued that it was not prudent to pay sales tax directly to the government in a given month and claim in the following month.

He was of the view that by eliminating input tax at the import stage, the FBR would be able to reduce monthly refund claims by Rs160 million, which would ultimately give a sigh of relief to the farmers. 

Published in The Express Tribune, June 25^th, 2019.

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