Karachi, January 18, 2025 – The Federal Board of Revenue (FBR) has confirmed its obligation to pay interest on delayed sales tax refunds at the annual Karachi Interbank Offered Rate (KIBOR).
This provision is designed to ensure timely processing of refunds and provide relief to taxpayers facing delays.
The FBR clarified that the payment of interest for delayed refunds is mandated under Section 67 of the Sales Tax Act, 1990. This section outlines the legal framework for compensating taxpayers when their refunds are not processed within the specified timelines.
According to Section 67, if a refund due under Section 10 is not issued within the time frame stipulated in the law, the taxpayer is entitled to an additional payment. The amount of interest is calculated at the KIBOR rate per annum on the delayed refund amount. This interest is payable from the day after the refund deadline passes until the day the refund is issued.
However, the law includes safeguards to prevent misuse. If there are grounds to believe that a refund claim is inadmissible, the interest payment is withheld until the investigation is complete, and the claim is either approved or rejected. This ensures that only legitimate claims benefit from the interest provision.
Additionally, for refunds arising from orders issued under Section 66 of the Sales Tax Act, the FBR must process the refund within 45 days of the order. Failure to meet this timeline also triggers the interest payment at the KIBOR rate, starting from the date of the refund order.
This provision underscores the FBR’s commitment to improving refund mechanisms and building trust with taxpayers. By linking the interest rate to KIBOR, a widely recognized financial benchmark, the policy provides an equitable compensation mechanism for businesses whose cash flow may be disrupted by refund delays.
Taxpayers, particularly exporters and businesses reliant on timely refunds, have often voiced concerns about prolonged delays in receiving their dues. The enforcement of Section 67 is expected to incentivize the FBR to expedite processing while offering some financial relief to affected taxpayers.
With this measure, the FBR aims to strike a balance between safeguarding public funds and addressing taxpayer grievances, promoting greater efficiency in tax administration.