ISLAMABAD: September 26, 2024 — To boost the export industry, the Federal Board of Revenue (FBR) has officially introduced a new, fast-tracked sales tax refund system for exporters, effective from October 1, 2024.
According to a notification issued by the FBR, the updated “FASTER” system will allow all categories of exporters to receive their sales tax refunds within 72 hours, providing much-needed liquidity to the sector.
Previously, the FASTER system was limited to five leading export-oriented sectors, namely textiles, carpets, leather, sports goods, and surgical instruments. However, this restriction has now been lifted, enabling all exporters to benefit from this accelerated refund process. The decision marks a major step forward in facilitating the broader export community in Pakistan and enhancing the ease of doing business.
The change was enacted through Statutory Regulatory Order (SRO) 1507 (I)/2024, which amends the Sales Tax Rules, 2006. Under the new regulations, exporters can now expect prompt payment of refunds for tax periods starting from July 2019 onward, and for all refund claims submitted from October 1, 2024. This broadening of scope will likely ease cash flow concerns for businesses across a range of industries by ensuring faster access to their due refunds.
The new procedure extends to all types of exporters, encompassing both manufacturers and commercial exporters. A key feature of the update is that commercial exporters will need to provide an export proceeds realization certificate or bank credit advice to process their refund claims.
While the FASTER system remains the primary channel for quick refunds, claims that do not meet the necessary criteria will be processed through the Sales Tax Automated Refund Repository (STARR) system. This dual mechanism is designed to ensure that all legitimate refund claims are processed efficiently, even if they are not eligible for the expedited FASTER channel.
Another notable amendment involves the treatment of refunds for goods supplied at zero-rate. According to the FBR, the refund in such cases will be restricted to the input tax paid on purchases or imports that are actually consumed in the manufacturing of the goods. This move aims to streamline and clarify the refund process for zero-rated supplies, offering greater transparency and precision in the tax system.
This expansion of the FASTER system to all exporters is expected to provide a significant boost to Pakistan’s export sector, improving cash flow and enhancing competitiveness in international markets. The FBR’s focus on improving tax refund processes reflects its commitment to supporting the country’s economic growth and bolstering its export potential.