KARACHI: Millat Tractors Ltd (MTL) has stopped tractor production till further notice due to the government`s failure to issue a mechanism for payment of refund claims.

In a stock filing on Thursday, MTL informed all the stakeholders that the general sales tax (GST) on tractors is 10 per cent and the GST on all input raw materials is 18 per cent, resulting in a continuous stream of refunds.

The farm machinery maker said the government has yet to issue any mechanism for payment of refund claims despite MTL seeking clarification. As a result, the company is now constrained to stop production till further notice.

On Aug 12, MTL had warnedthat sales and bookings of tractors were limited and only being made to agri-loan customers. As a result, completely built-up (CBU) units are piling up, and working capital is squeezing.

MTL said that if the GST refund issue persists and the Federal Board of Revenue delays the clarification, the company may have to consider the plant shutdown.

MTL assembled 979 units and sold 605 units in July versus 1,506 and 1,656 in July 2023.

In FY24, the company assembled and sold 30,187 and 30,203 units, as compared to 19,097 and 18,622 in FY23. Suspension in the production of tractors will put many auto part vendors, especially small and mediumsized units, in a deep financial crisis. Many vendors rely only on parts supplied to the tractor industry.