Al-Ghazi Tractors asks FBR to release Rs5 billion refunds

KARACHI: Al-Ghazi Tractors Limited (AGTL) on Saturday requested the Federal Board of Revenue (FBR) Anomaly Committee to issue the refunds of over Rs5 billion to the tractor manufacturers to resolve their liquidity crisis.

The letter sent to the committee asked the FBR to remove the historical anomaly that was resulting in huge liquidity challenges and considerable financial cost for the tractor industry.

It said that due to the liquidity crisis faced by the government, sales tax refunds were not being released in a timely manner ie three days from the claim sanctioned. Instead, due refunds were released in tranches with delay of several months. As of today, more than Rs5 billion of the tractor industry remain 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 Rs2.3 billion approx,” Shahid Hussain, CEO, Al-Ghazi Tractors said.

Currently, output sales tax was chargeable on supply of tractors at five percent as against 17 percent payable as input tax while purchasing components, local as well as imported. Accordingly, local tractor assemblers were 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 government in a given month and subsequently claiming refund in the following month,” Hussain said.

FBR has already adopted this mechanism under SRO 1125 of December 2011 for other sectors where special sales tax rates were being applied. “By eliminating the aforesaid input tax at import stage, the FBR will be reducing monthly refund claims to the tune of Rs160 million which will ultimately give a sigh of relief to the industry and poor farmers,” he added.

If the change was implemented to rationalise the act, government would not incur or bring any loss to the treasury. He also requested FBR to issue the refunds of over Rs5 billion to the tractor manufacturers to resolve their liquidity crisis.