Karachi, November 3, 2023 – The Salt Manufacturers Association of Pakistan (SMAP) has made a compelling appeal to the Federal Board of Revenue (FBR), urging the processing of refund claims through the FASTER (Fully Automated Sales Tax E-Refund) system for all exporters, highlighting a pressing issue that affects numerous members within the industry.
In a letter addressed to the FBR chairman, the salt manufacturers raised their concerns regarding the challenges faced by a substantial number of their members while attempting to process their sales tax refunds through the FASTER [Annexure H] system. The FASTER system was introduced as part of a government initiative to streamline and improve the efficiency of processing sales tax refund claims for export-oriented industries, following the withdrawal of the zero-rated regime from July 1, 2019.
While acknowledging and commending the government’s effort to promote nonconventional products such as FASTER for Sales Tax Refund, the letter expressed the industry’s concern that the system is currently limited to only five prescribed export-oriented sectors. This limitation has led to unintended injustices for other export-oriented industries, including the salt sector, which has demonstrated substantial potential to contribute significantly to Pakistan’s economic development.
The salt industry in Pakistan has made remarkable progress and gained recognition among foreign salt importers. However, the current restriction on the application of the FASTER system to specific sectors poses a threat to the momentum of growth achieved thus far.
SMAP has observed that after more than four years of successful operation, the FASTER system has begun rejecting sales tax refund claims from exporters outside the prescribed zero-rated sectors, citing rule 39B of the Sales Tax Rules, 2006. This development necessitates manual processing of sales tax refunds, introducing unnecessary taxman-taxpayer intervention and placing additional strain on the limited human resources of the Federal Board of Revenue.
The manual refund process not only extends the time required for refunds but also violates the stipulation in section 10 of the Sales Tax Act, 1990, which mandates the refund of input tax to registered persons within 45 days of filing the refund claim. As a result, exporters from sectors beyond the specified five export-oriented sectors face critical cash flow challenges, enduring delays of approximately 4 to 6 months in obtaining their refunds.
In a global landscape where best practices favor the adoption of technology to expedite processes, the industry finds it disheartening to witness a reversal in Pakistan’s approach. The FBR’s insistence on slowing down the business process contradicts the prevailing global trend and imposes a severe setback on an already struggling economy grappling with unprecedented inflation.
The SMAP’s plea emphasizes the fact that the recent actions by the Federal Board of Revenue appear to run counter to their long-standing commitment to minimizing unnecessary human intervention. The anticipated benefits of these actions remain unclear, except for an increase in interactions between tax officers and taxpayers, leading to additional hurdles and challenges for genuine exporters.
In light of these concerns, the SMAP has earnestly requested the FBR’s intervention to enable the smooth functioning of the FASTER system and extend its benefits to all exporters without any discrimination. Such a step, they argue, would not only uphold the principles of fairness and equality but also contribute to fostering a business-friendly environment in Pakistan, supporting the growth of vital industries like the salt sector and the nation’s overall economic development.
