‘Bogus refund claims hamper payment to genuine taxpayers’

KARACHI: A large number of disputed/fake claims hampered the release of refund payments to genuine industrialists, who are in liquidity crisis due to lockdown and widespread coronavirus, sources said on Monday.

The sources said the Federal Board of Revenue (FBR) is prioritising release of sales tax refunds most of which are disputed or fake.

“Some quarters are taking advantage of coronavirus and forcing government authorities on release of sales tax refunds instead of income tax refunds,” a FBR official said requesting anonymity.

The sources said the issuance of sales tax refunds has been centralised through fully automated sales tax electronic refund. “The system is making claim verification and refund payment electronically,” a source said. “Some were demanding repayments on claims without supporting documents.”

Under the new system, the FBR issues sales tax refunds to exporters by electronically communicating refund payment orders 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.

Earlier this month, the Prime Minister Imran Khan approved Rs1.24 trillion as economic relief package in the wake of coronavirus lockdown, out of which Rs100 billion was allocated for refunds. The stimulus package is aimed at addressing the liquidity challenges faced by the industry besides improving cash flow position of the companies to ensure that workers should get their salaries on time. The Rs100 billion was for sales tax refunds and duty drawback.

The FBR sources said initially income tax refunds are given priority because refund claims under direct taxes are mostly verified and have the highest backlog within the tax authorities.

The sources said income tax refund claims amounted to around Rs150 billion and most of those claims were of industrial entities, which could benefit from the amount in payment of wages and salaries.

The FBR earlier this month directed tax offices to process the sales tax refund claims on urgent basis and sanction the admissible amount to the refund claimants as per the law. The FBR headquarter transfers tax refund payment directly to claimants’ bank account after verification by a concerned tax office.

The FBR directed all the chief commissioners of Inland Revenue service to monitor the process in order to maintain transparency and fairness and submit daily compliance report to the tax authority.

The sources said the staff of FBR was trimmed to 50 percent due to coronavirus lockdown and verification of genuine claims requires tax officials having expertise in relevant field. Further, the sources said any haste in this regard would benefit unscrupulous individuals. Currently, cases of sales tax refunds on fake and flying invoices are before the Federal Tax Ombudsman and many tax officials have already been held responsible for alleged release of bogus refunds.

FBR released sales tax refunds of Rs36.82 billion during July 1-January 21 of 2019/20 compared with Rs13.91 billion in the corresponding period of the last fiscal year.