New taxes threaten agro economy: PAAPAM

LAHORE: The tractor manufacturing and parts industry is on the brink of collapse due to a new sales tax and delayed refunds, industry leaders warned on Wednesday.

This was said at a meeting held by the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) at the Millat Tractors plant in Sheikhupura to address the issues raised by new taxation measures.

The imposition of a 10 per cent sales tax on tractors in June has brought challenges for manufacturers like Millat Tractors Limited (MTL), the leaders added, pushing the company back to the refund regime.

The PAAPAM delegation comprised Chairperson Abdul Rehman Aizaz; Senior Vice President Mumshad Ali; and other leaders, including Irfan Qureshi, Rehan Riaz, Shahab Saleem, Jawaid Hafeez and Anas Haroon.

The leaders added that the current issues are similar to the challenges faced post-2012 when SRO 363 established a refund mechanism that processed refunds within three months.Abdul Rehman Aizaz and Mumshad Ali highlighted the urgency of the situation. They said that the industry has been awaiting guidelines from the Federal Board of Revenue (FBR) since the budget announcement on a refund mechanism, but has not received any response despite numerous letters and appeals.

MTL operations have also been halted since July 1st with no orders or invoices issued, causing significant financial losses, adding that last year the company sold 30,000 units.The leaders added that the tractor sector is vital for Pakistan’s economy. It employs 200,000 people and exports $20 million worth of parts annually. With a robust vendor base of 200 and an employment figure reaching 200,000, the industry has achieved an impressive 95 per cent localization.

The delegation urged the Ministry of Finance to intervene and ensure that the FBR establishes an efficient refund process, similar to one under SRO 363(i)/2022. It added that Pakistan’s agriculture sector heavily relies on the timely availability of tractors and related machinery. And a shutdown in the tractor manufacturing industry would have ripple effects throughout the economy.

In 2022, the introduction of SRO 563(1)/2022 complicated matters further by imposing conditions on the buyer of tractors, the leaders shared. The refund benefit was limited to farmers who had valid documentation of their land, excluding many who could not meet these stringent requirements. Since then, despite fulfilling the stipulated conditions, the industry has not received due refunds, causing a severe financial strain.