FTO slams Millat Tractors, directs FBR to take action 

LAHORE: The Federal Board of Revenue (FBR) is set to take action against Millat Tractors for allegedly overcharging customers in the name of sales tax. The federal government had suspended tax on tractors in an effort to provide relief to farmers as part of this year’s budget.

Millat has been accused of charging the tax despite the government lifting it as part of the Finance Act 2022. Early reports have indicated that Millat has withheld a total of Rs 1.87 billion in relief that was intended for farmers, and instead kept it for itself.

The case came to the fore after a complaint was filed to the Federal Tax Ombudsman (FTO) by a Sialkot based farmer, Abaid Ullah. The complainant claimed that Millat Tractors had collected Rs 93,500 as sales tax as part of the transaction, whereas the Government had exempted customers from the sales tax as part of the Finance Act, 2022. 

In its ruling, the FTO has held that Millat Tractors has been overcharging its customers by not passing on the relief entitled to them. It has also directed the FBR to take punitive action against the company. 

An oligopoly 

Founded in 1964 in Lahore, Millat is the authorised manufacturer of the American Massey Ferguson tractor in Pakistan. The company was nationalised in 1972, and made a part of the Pakistan Tractor Corporation (PTC).

The actual structure of the tractor market is somewhat oligopolistic. Millat Tractors has a 70% market share, and a production capacity of 40,000; while Al Ghazi Tractors has a 29% market share, and a production capacity of 30,000.

As the biggest tractor manufacturer in Pakistan, Millat charging tax as part of their invoices despite the government not imposing any tax is a major problem for farmers that have not gotten much needed relief in the wake of this year’s massive floods. 

Already farmers have been complaining that the recently announced Kissan Package has been benefitting the fertiliser and tractor industries instead of the farming community. “Prime Minister Shehbaz Sharif is describing the package as historic. However, the reality is far from it as most of the steps taken in it are conventional. Under the guise of relief to farmers, real support has been given to tractor and fertiliser manufacturing factories in the form of subsidies and duty cuts for import of tractor parts,”  read a statement of the Pakistan Kissan Rabita Committee. 

The anatomy of tax fraud  

“Look at it this way. There is a subsidy/refund by the government on the purchase of tractors provided by the government. This is meant for farmers, and not companies and/or people who engage in the business of tractors. So somebody booked tractors with Millat, and what Millat does is that, in conjunction with tehsildars, it acquires the sales deeds of zamindars. It acquires the tractors under their name of the zamindars and then sells the tractors in the market in bulk. However, the Government had provided the zamindars with the refund facility, and thus Millat was benefiting from it ”, says Almas Ali Jovindah, the FTO spokesperson.  

“When this complaint reached us, we identified that there had been a huge default on the part of Millat Tractors. They had taken a huge refund by the government on the fake accounts of agricultural farmers to whom they had practically sold no tractors at all.” Jovindah continued.  

Media reports suggest that Millat Tractors has withheld a total of Rs 1.87 billion in relief that was intended for farmers, and instead kept it for itself. Millat Tractors, in contrast, has notified the Pakistan Stock Exchange that it still awaits the FTO’s official order stating and stating that it has never been party to the proceedings of the decision. Furthermore, Millat Tractors has stated that “It shall confront this order at appropriate forums."