Islamabad: Al-Ghazi Tractors Limited (AGTL) has requested Federal Board of Revenue’s (FBR) Anomaly Committee to also remove a historical anomaly that is resulting in huge liquidity challenges and considerable financial cost for the tractor industry.
The letter sent to the committee by the company said that due to a liquidity crisis faced by the Government, sales tax refunds are not being released in a timely manner i.e. three days after the claim is sanctioned. Instead, due refunds are released in tranches with a delay of several months. As of today, more than Rs 5 billion dues of the Tractor industry are stuck with FBR, the letter claimed.
“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 Rs 2.3 billion,” said Shahid Hussain, CEO, Al-Ghazi Tractors.
Currently, output sales tax is chargeable on the 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 the excess input sales tax they from FBR but that gets 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 a 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.
The letter claimed that above change if implemented to would not bring any loss to the government’s treasury,
He also requested FBR to issue the refunds of over Rs. 5 billion to the tractor manufacturers to resolve their liquidity crisis.
