KARACHI, August 31, 2025 – The Federal Board of Revenue (FBR) has released updated guidelines for claiming refunds of input tax for the tax year 2025-26.
These changes follow amendments to the Sales Tax Act, 1990, introduced through the Finance Act, 2025, with a focus on expediting refund processes and improving compliance measures for registered taxpayers.
Section 10 of the Sales Tax Act, 1990, now provides a detailed framework for input tax refunds. The provision states that if the input tax paid on taxable purchases during a tax period exceeds the output tax due on account of zero-rated local supplies or exports, the excess amount will be refunded to the registered taxpayer within 45 days of filing a valid refund claim. The process will be governed by conditions and procedures specified by FBR through official notifications.
In cases where excess input tax arises from supplies other than zero-rated or exports, the refundable amount may be carried forward to the next tax period. It will then be treated as input tax for that subsequent period. FBR retains the authority to issue notifications prescribing fixed rates and procedures for refunds related to exports, ensuring uniformity and clarity.
Additionally, before processing any refund, the FBR will adjust outstanding liabilities, including unpaid taxes, default surcharges, or penalties owed by the taxpayer under any law administered by the Board. Only after such adjustments will the input tax refund be disbursed.
To safeguard against fraudulent claims, the law mandates that any inquiry or audit concerning the admissibility of an input tax refund must be concluded within 60 days. However, this period may be extended up to 120 days by an Additional Commissioner Inland Revenue and, in exceptional cases, up to nine months with proper justification.
Tax experts believe these updates aim to streamline the refund process, reduce delays, and ensure compliance with tax regulations, ultimately benefiting exporters and businesses with large input tax credits.
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Procedures regarding input tax refunds may change based on amendments to tax laws, official notifications, or FBR policy updates. Taxpayers should consult qualified tax professionals or refer to the Federal Board of Revenue (FBR) for official guidance before making any claims or compliance decisions.