ISLAMABAD   -  Al-Ghazi Tractors Limited (AGTL) has requested to the Federal Board of Revenue (FBR)’s anomaly committee to remove the anomaly that is resulting in huge liquidity challenges and considerable financial cost for tractor industry.

The AGTL has sent a letter to the FBR’s anomaly committee. It has requested that that due to liquidity crisis faced by the Government, sales tax refunds are not being released in a timely manner ie three days from the claim sanctioned, instead, due refunds are released in tranches with delay of several months. As of today, more than Rs. 5 billion of Tractor industry is stuck up with FBR.”

“The Company is currently facing liquidity challenges and incurring huge financial cost due to non-refunded AGTL’s due sales tax refunds by the authority to the tune of PKR 2.3 billion approx.” said Shahid Hussain, CEO, Al-Ghazi Tractors. Currently output sales tax is chargeable on supply of tractors @5% as against 17% payable as input tax while purchasing components, local as well as imported.

Accordingly, local tractor assemblers are supposed to claim sales tax refunds that get accumulated by default and remain claimable from Government every month.

“Given the above imbalance, it is strongly proposed that GST be abolished at import stage on CKD components imported by Tractor OEMs for local assembly of Tractors as it is not prudent paying sales tax directly to the Govt. in a given month and subsequently claiming refund in the following month,” said Shahid.

“FBR has already adopted this mechanism under SRO 1125 of December 2011 for other sectors where special sales tax rates are being applied.

By eliminating the aforesaid input tax at import stage, FBR will be reducing monthly refund claims to the tune of Rs160m which will ultimately give a sigh of relief to the industry and poor farmers,” he added.

Above change implemented to rationalize the act, Govt. would not incur or bring any loss to the treasury. He also requested FBR to issue the refunds of over 5 billion to the tractor manufacturers to resolve their liquidity crisis.