Millat Tractors Ltd (MTL) has halted tractor production indefinitely due to the government’s failure to establish a system for processing GST refund claims. In a stock exchange filing on Thursday, MTL stated that while the GST on tractors is 10%, the GST on raw materials is 18%, leading to a buildup of refund claims.
MTL has repeatedly sought clarification from the government, but a refund mechanism has yet to be provided. As a result, the company has been forced to stop production until further notice.
On August 12, MTL warned that tractor sales and bookings were restricted to customers with agricultural loans. This limitation has caused an increase in unsold units and a tightening of working capital. MTL may continue the plant shutdown if the GST refund issue remains unresolved and the Federal Board of Revenue delays clarification.
MTL assembled 979 tractors in July and sold 605 units, compared to 1,506 and 1,656 units in July 2023. For FY24, MTL assembled and sold 30,187 and 30,203 units, respectively, up from 19,097 and 18,622 units in FY23. The production halt could financially harm many small and medium-sized auto parts vendors who rely heavily on supplying parts to the tractor industry.
