Millat Tractors Limited, one of Pakistan’s premier tractor manufacturers, has firmly rejected the Federal Board of Revenue’s (FBR) demand of Rs18 billion in sales tax, terming it as unrealistic and illegal.
In a formal notice to the Pakistan Stock Exchange (PSX), the company has stated that it will utilize all available appellate forums to challenge this order. This dispute highlights key concerns over tax policy, business climate, and regulatory enforcement in Pakistan.
The controversy stems from an audit conducted by the Large Taxpayer Office (LTO) Lahore, which resulted in the issuance of a sales tax liability and penalties order against Millat Tractors Limited.
The FBR claims that its findings are based on detailed investigations and that the demand is justified as per Pakistan’s tax regulations.However, Millat Tractors strongly disputes these findings and has vowed to pursue all legal channels to overturn the decision.
The FBR’s Sales Tax Demand
Millat Tractors Limited has made its stance clear by stating that:
- The Rs18 billion tax demand is baseless and does not reflect the company’s actual tax obligations.
- The FBR, in its attempt to meet unrealistic revenue targets, is imposing heavy tax burdens on existing taxpayers instead of broadening the tax base.
- This move threatens to damage investor confidence and disrupt business operations within the manufacturing sector.
- The company will contest this demand through appellate forums, ensuring that the principles of justice and fairness are upheld.
Pakistan’s manufacturing sector is already grappling with numerous challenges, including inflation, high energy costs, and economic instability. The imposition of unrealistic tax demands on key industrial players such as Millat Tractors sets a dangerous precedent.
Impact on the Manufacturing Sector
- Discourage investment in the sector.
- Reduce job creation due to financial constraints on companies.
- Create uncertainty among local and foreign investors.
- Lead to higher product prices, affecting farmers and the agricultural industry that heavily relies on affordable tractors.
The FBR’s approach to revenue collection has long been a subject of debate. Instead of focusing on tax broadening measures, the FBR often seeks to extract revenue from compliant taxpayers, which raises concerns about:
- The effectiveness of tax administration.
- The impact of arbitrary tax demands on businesses.
- The need for tax policy reforms to create a more business-friendly environment.
