Karachi, April 25, 2024 – The Pakistan Business Council (PBC) has called for significant modifications to the FASTER system, aiming to extend sales tax refund benefits to all exporters and facilitate the adjustment of provincial input tax on services.
This move seeks to correct the current system’s limitations, which disproportionately affect exporters outside of the five primary export-oriented sectors.
In a detailed letter addressed to Afaque Ahmed Qureshi, Member Inland Revenue (Policy), the PBC expressed concerns over the existing operational framework of the FASTER system, which presently processes sales tax refunds exclusively for five designated export sectors. This restriction has been in place since October 2023 following the FBR’s decision to enforce Rule 39B of the Sales Tax Rules, 2006, which supports these limitations.
The PBC highlighted that prior to the withdrawal of the zero-rated regime on July 1, 2019, the FASTER system was introduced to process refunds efficiently across all export categories. However, the subsequent narrowing of its scope has led to non-preferential sectors relying on a manual refund process since October last year. According to the PBC, this shift not only slows down operations but also opens up avenues for potential misuse by both unscrupulous elements within the business community and the FBR itself.
Further complicating matters, the PBC pointed out inconsistencies in the handling of input tax adjustments. Despite legal provisions allowing exporters to claim input tax on invoices from service providers registered under provincial sales tax authorities, the FASTER system, in practice, often disallows such claims. This issue persists irrespective of whether the process is automated or manual, undermining the system’s efficiency and fairness.
The PBC’s concerns are rooted in procedural flaws that could potentially stifle the export sector’s growth. By restricting efficient tax refund processes to only a handful of sectors and complicating input tax adjustments, the FBR’s current practices could be seen as disincentives for broader export activities, which are vital for Pakistan’s economic growth.
The council has therefore urged Qureshi to revise Rule 39B of the Sales Tax Rules, 2006, to include all export sectors in the FASTER system’s scope, ensuring a more equitable and effective refund process. Additionally, the PBC has called for adjustments to the system that would reliably allow the input tax adjustments for invoices verified by provincial authorities, as clarified by the FBR in a letter dated March 7, 2024.
This request by the PBC is not just about adjusting a tax mechanism—it’s about fostering a fair business environment that encourages all exporters. The FASTER system, originally designed to streamline and automate refunds, should ideally be an asset to all exporters, rather than a source of disparity.
As the discussion unfolds, stakeholders across Pakistan’s export sectors are keenly watching how the FBR will respond to these recommendations. An equitable adjustment to the FASTER system could potentially unlock greater productivity and profitability across the nation’s diverse export landscape, contributing significantly to the country’s economic resilience.
The outcome of this appeal will be crucial for shaping the operational dynamics of Pakistan’s export industry and its ability to compete on a global scale, underscoring the need for a responsive and adaptive tax administration system.
