Tractor industry laments GST refund uncertainty

Pakistan's tractor manufacturers and parts makers, long-established in the country, are now facing extreme insecurity due to unclear mechanisms for GST refunds. This uncertainty is just one of many challenges plaguing the auto industry, which has frequently found itself in crisis. However, the situation has become particularly dire for the tractor sector, as one of the major manufacturers recently shut down its operations.

In this backdrop, the Pakistan Association of Auto Parts and Accessories Manufacturers has written to PM Shehbaz Sharif, requesting urgent intervention. PAAPAM President Abdul Rehman Aizaz stated in the letter that tractor production and sales have significantly declined since July 1st due to confusion over the GST refund process. The imposition of a 10% GST on tractor sales has further complicated matters. The Federal Board of Revenue has not issued clear guidelines to differentiate between farmers, who are subject to a 10% GST, and non-farmer buyers, who should be charged 18%. Additionally, multi-billion-rupee GST refunds have been stuck with the FBR for years, leading to severe cash flow issues.

PAAPAM, established in 1988, represents over 290 automotive parts manufacturers across Pakistan. The association stressed that the tractor and parts manufacturing sector is crucial not only to the agricultural economy but also to the formal, documented economy. The ongoing ambiguity has nearly halted tractor sales, causing production stoppages for parts manufacturers. If the situation is not addressed urgently, the ability to pay employees will rapidly decline, leading to widespread layoffs, said the association.

PAAPAM has expressed confidence that with the PM's intervention, these challenges can be overcome, allowing the industry to continue contributing effectively to the nation's economy.