Karachi, April 8, 2025 – The Karachi Tax Bar Association (KTBA) has urged the Federal Board of Revenue (FBR) to adopt a hybrid approach for the issuance of refunds, emphasizing the need to prioritize time-bound claims, verified applications, and sector-specific urgencies.
In a formal communication addressed to FBR Chairman Rashid Mahmood Langrial, the KTBA raised concerns over the uniform application of the First-In, First-Out (FIFO) directive in the current refunds framework.
The KTBA, in its detailed letter, acknowledged the FBR’s ongoing efforts to curb fraudulent refunds and streamline the processing system. However, KTBA President Ali A. Rahim noted that the strict implementation of the FIFO methodology could create operational bottlenecks, especially when older claims are entangled in audits or incomplete documentation.
While the FIFO method appears systematic, the KTBA pointed out its incompatibility with several statutory provisions. For instance, it does not align with timelines stipulated under Section 170(4) of the Income Tax Ordinance, 2001, and Sections 10(1) and 66 of the Sales Tax Act, 1990. Moreover, delayed refunds—regardless of cause—are legally entitled to additional payments under Section 171 of the Ordinance and Section 67 of the Act. KTBA stressed that just as penalties for late tax payments are rigorously enforced, the same principle should apply to delayed refunds, in order to uphold the spirit of the law.
The association further argued that the FIFO policy disregards conditional precedents under the sales tax regime, where refunds are contingent on specific compliance metrics rather than mere chronology. Additionally, FIFO may conflict with judicially mandated refunds, especially those resulting from decisions by the Appellate Tribunal Inland Revenue (ATIR), Federal Tax Ombudsman (FTO), or other courts—potentially leading to unnecessary legal challenges.
In conclusion, the KTBA has appealed to the FBR for a more nuanced and legally compliant refunds system. It recommended a hybrid approach that blends statutory timelines, verified claims, and sectoral importance to ensure fairness and maintain taxpayer confidence. Such reforms, the KTBA emphasized, will not only enhance trust in the tax administration but also promote better compliance and smoother revenue management.