Refunds' payment a must to avert industrial crisis

The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has asked the Federal Board of Revenue to clear about Rs.5 billion sales tax refunds of tractor industry immediately, as non-disbursement of refunds might cause delay in payment to the vending industry.

In a joint statement, PAAPAM Chairman Abdul Rehman Aizaz, Senior Vice Chairman Abdur Razzaq Gauhar and Vice chairman Irfan Qureshi, observed that tractor industry is facing severe liquidity crunch, as Millat Tractor's overdue sales tax refunds of about Rs3.5 billion while Rs1.4 billion of Al Ghazi are pending for the last one and a half year. As a result, there is a strong possibility that they may not be able to continue to make regular payments to around 250 vendors, engaged in making parts and accessories for the local tractor industry and creating job opportunities for about hundreds of thousands of families.

Abdul Rehman Aizaz pointed out that tractor manufacturers and their vending industry are inter-connected and if refund payments are stopped to the tractor makers the vendors will also face cash flow blockage.

It is to be noted that the sales tax is paid by the vending industry on supply of parts to tractor manufacturers, who return the tax amount after they get refunds of the same from the FBR. Currently the output sales tax is chargeable on supply of tractors at 5 percent against 17 percent paid on purchasing local or imported raw materials and components.

PAAPAM Chairman Abdul Rehman Aizaz said that the tractor vending industry is operating only on marginal profitability and working hard to supply parts to the tractor industry aimed at increasing agricultural production. He said if the overdue payment is not made immediately to the tractors manufacturers they will be unable to continue payments to the vendors, resulting into closure of their operation, as they have limited resources and limited working capital lines from the banks.

Besides clearing the overdue sales tax refunds of Rs.5 billion at the earliest, the Federal Board of Revenue also needs to ensure that SRO 363(1)/2012 should be followed in spirit in ERS of FBR.

Senior Vice Chairman Abdur Razzaq Gauhar said that agricultural mechanization is a key to food security and if tractor industry continuously faces liquidity crunch the target of food security cannot be achieved.