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Tractor industry shutting down as FBR fails to release Rs6b refunds

Tractor industry shutting down as FBR fails to release Rs6b refunds

LAHORE: Long delay in Rs6 billion sales tax refunds has forced the tractor industry to cut back its production substantially, with likelihood of complete closure by next week as per a statement issued by the Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM).

In anticipation of closure, tractor makers have also stopped ordering parts from the vendors, leaving them in total chaos. As a consequence of the closure of the tractor industry, more than 250 parts manufacturers and their thousands of downstream suppliers have been forced to shut down their industrial operations, rendering millions without jobs. The sector engages around two million people directly and indirectly.

Last month, PAAPAM had accused the Federal Board of Revenue (FBR) and its sub-organs of creating unfair hurdles and using delaying tactics to clear the billions of rupees’ sales tax refunds of the tractor industry.

PAAPAM delegation had lodged their complaint with Federal Minister of Industries and Production Khusro Bakhtiar and Secretary Industries and Production Dr Hamid Ateeq Sarwar to seek support in this regard. The government representatives had assured the delegates of immediate release of refunds that were pending for more than 18 months.

However, there has been no change in status quo despite clear warnings given to the state about the consequent devastating impacts of the delay on the industry, which faces a severe liquidity crunch.

PAAPAM SVP Abdur Raazaq Gauhar said, “The refund amount is Rs6 billion, but the vendors are small entrepreneurs and cannot pull on without their genuine refunds.”

The liquidity problem would destroy the largest informal agro sector, which was the backbone of the country, he added.

PAAPAM former chairman Nabeel Hashmi said how the government could achieve the GDP growth targets by placing the industry on a ventilator. This undue delay in decision making has given a circular effect to the whole vending industry to the grassroots level, forcing them to close down at all.

In August, FBR Chief Operations and Refunds Officer Mohammad Abu Bakar Siddique informed the PAAPAM delegation that the board had no reason to stop the tractor industry’s refunds, and directed to contact Large Taxpayer Unit (LTU) Lahore chief commissioner Qesar Iqbal.