Advisory on Claiming Sales Tax Refunds under Updated Law for Tax Year 2024

Advisory on Claiming Sales Tax Refunds under Updated Law for Tax Year 2024

Karachi, December 4, 2023 – The Federal Board of Revenue (FBR) has issued a crucial advisory to taxpayers in Pakistan, emphasizing the importance of timely claiming sales tax refunds under the updated tax law for the tax year 2024.

The FBR has introduced amendments to the Sales Tax Act, 1990, specifically addressing the period within which taxpayers must lodge their refund claims.

According to the revised Section 66 of the Sales Tax Act, 1990, taxpayers are now required to file claims for refunds within one year from the date of payment. This amendment aims to streamline the refund process and ensure that claims are made promptly, reducing administrative complexities and promoting fiscal discipline.

The amended Section 66 reads as follows:

Section 66. Refund to be claimed within one year:

“No refund of tax claimed to have been paid or overpaid through inadvertence, error, or misconstruction or refund on account of input adjustment not claimed within the relevant tax period shall be allowed, unless the claim is made within one year of the date of payment:

Provided that in a case where a registered person did not deduct input tax within the relevant tax period, the Commissioner may, after satisfying himself that input tax adjustment is due and admissible, allow the registered person to take such adjustment in the tax period as specified by the Commissioner:

Provided further that in a case where the refund has become due on account of any decision or judgment of any officer of Inland Revenue or court or the Tribunal, the period of one year shall be reckoned from the date of the judgment or decision of such officer, court, or Tribunal:

Provided further that the application or claim filed under this section shall be disposed of within a period not exceeding ninety days from the date of filing of such application or claim.

Provided also that no refund shall be admissible under this section if the incidence of tax has been passed directly or indirectly to the consumer.”

The new provisions also highlight the responsibility of the Commissioner to ensure that input tax adjustments are legitimate and, if so, to permit adjustments within the specified tax period. Additionally, in cases where refunds are a result of decisions or judgments from tax authorities or courts, the one-year timeframe begins from the date of such decisions.

Crucially, the FBR underscores its commitment to efficiency by stipulating that applications or claims made under this section should be processed within a maximum period of ninety days from the date of filing.

The final provision in the amended Section 66 reinforces the principle that no refund will be granted if the incidence of tax has been transferred, directly or indirectly, to the end consumer.

The FBR’s move to tighten the timeframe for claiming sales tax refunds aims to bring greater clarity, efficiency, and accountability to the taxation process. Taxpayers are urged to familiarize themselves with these updated regulations to ensure compliance and to safeguard their entitlement to refunds under the Sales Tax Act, 1990 during the tax year 2024.