Sales tax refunds up 165pc under automated system

KARACHI: Sales tax refund owed to exporters jumped 165 percent during the current fiscal year of 2019/20 with the launch of Federal Board of Revenue’s (FBR) automated sales tax refund system as it accelerated refund process, tax officials said on Thursday.

The FBR deployed the automated refund system in last August to speed up release refunds to five major export-oriented sectors following withdrawal of zero-rated regime.

FBR officials informed the National Assembly Standing Committee on Finance, Revenue and Economic Affair at Custom House, Karachi, that the revenue authorities had released sales tax refunds worth Rs36.82 billion during July 1-January 21 of 2019/2020, as compared with Rs13.91 billion in the corresponding period of the last fiscal year.

The meeting was convened as the standing committee had asked the FBR to explain its “Fully Automated Sales Tax Electronic Refunds (FASTER)” because several exporters had complained of glitches in the system.

Under the new system, the FBR issues sales tax refunds to exporters by electronically communicating Refund Payment Orders (RPOs) to the State Bank of Pakistan within 72 hours of submission of claim for onward advice to banks for credit into the claimants' bank accounts.

The officials of Large Taxpayers Unit (LTU) Karachi explained that the FBR had made the refund system foolproof and eliminated chances of fraud.

In the past some unscrupulous persons had taken advantage of loopholes in sales tax refund mechanism, which resulted in huge losses for the national exchequer.

FBR officials informed standing committee that FASTER was introduced to facilitate exporters in quick disbursement of refunds after elimination of zero-rated tax regime. After withdrawal of zero-rating, all the supplies i.e local and imports are subject to normal 17 percent sales tax.

However, exporters are allowed refunds against payment of 17 percent sales tax through the automated system.

“Some issues related to monthly sales tax returns emerged, but the FBR had processed all the claims after rectification of data errors. Sales tax refunds were being issued in 72 hours after filing of refund claims,” they added.

The standing committee was also informed that the FBR has nominated focal persons for resolving FASTER related issues. LTU Karachi has jurisdiction over big volume textile exporters, and the issuance of refunds from the unit registered phenomenal increase of 317 percent in the current fiscal year, they added.

The LTU Karachi issued Rs8 billion sales tax refunds during July 1-January 21 of 2019/2020, compared with Rs1.8 billion in the same period of the last fiscal year, the standing committee was informed.