Khashif Talks Unlock Knowledge & Explore with Khashif Talks!
The Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) has raised alarms about a potential complete shutdown of the tractor industry, attributing the crisis to prolonged delays in releasing General Sales Tax (GST) refunds by the Federal Board of Revenue (FBR) and the recent implementation of a new GST regime under Statutory Regulatory Order (SRO) 563.
Paapam has expressed grave concerns over the cash flow crisis impacting the entire supply chain, from raw material suppliers to small and medium-sized enterprises (SMEs) in the engineering sector. The association has reported that previous attempts to resolve the issue through the finance and industries ministries were unsuccessful, leading them to seek direct intervention from the Prime Minister.
Paapam Chairman Abdur Rehman criticized the FBR’s policies, suggesting that the board’s actions have effectively held the engineering chain hostage. He highlighted that GST refunds for tractor assemblers have been withheld for years, with the new SRO 563 further complicating the situation. The chairman warned that this standoff threatens jobs, tax revenue, import substitution, and tractor and parts exports.
Paapam Senior Vice Chairman Mumshad Ali revealed that around 250 direct suppliers to major tractor assemblers, including Millat Tractors and Al-Ghazi Tractors, have halted operations due to delayed payments. Ali cautioned that if the situation persists, tractor assemblers might be forced to cease operations within a week.
The root of the issue lies in SRO 563, which governs GST refunds for tractor assemblers. This new regulation, which replaced SRO 363, has complicated the refund process by limiting refunds to farmer-buyers only. The lack of a mechanism to differentiate between farmer and non-farmer buyers has led to billions of rupees in refunds being withheld. Older refunds under SRO 363 remain unpaid, exacerbating the financial strain on assemblers, who are now relying on bank borrowing and are unable to accept new tractor bookings except for those financed through banks.
The ongoing cash crunch has caused significant delays in payments to suppliers, a situation that SMEs in the sector cannot sustain. In response to the crisis, Paapam’s executive committee has decided to escalate the matter to the Prime Minister’s office for intervention.
