Karachi, December 4, 2023 – The Federal Board of Revenue (FBR) has issued a crucial advisory to taxpayers in Pakistan, emphasizing the importance of timely claiming sales tax refunds under the updated tax law for the tax year 2024.
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Exporters Voice Outrage Over Abrupt Suspension of Online Sales Tax Refund Processing
Karachi, October 19, 2023 – Exporters in Pakistan are up in arms over the sudden suspension of online processing for sales tax refund claims by the Federal Board of Revenue (FBR).
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FBR Facilitates Submission of Sales Tax Refund Claims of Multi Tax Periods
Islamabad, October 18, 2023 – The Federal Board of Revenue (FBR) has taken a significant step to ease the process of claiming sales tax refunds for multiple tax periods.
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Hosiery manufacturers demand fast release of sales tax refunds
Hosiery manufacturers and exporters have urged the Federal Board of Revenue (FBR) to accelerate the pace of sale tax refund release.
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FBR links tax refund payment to realization of export proceeds
ISLAMABAD: Federal Board of Revenue (FBR) on Thursday linked the issuance of refund payment to the realization of export proceeds.
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FBR issues sales tax refund rules for tractor manufacturers
ISLAMABAD: The Federal Board of Revenue (FBR) on Friday April 29, 2022 issued sales tax refund rules for agriculture tractor manufacturers.
The FBR issued SRO 563(I)/2022 dated April 29, 2022 to insert new rules in the Sales Tax Rules, 2006.
Refund to Agricultural Tractor Manufacturers
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390. Application.— (1)This Chapter shall apply to existing and future refund claims as filed by the registered agricultural tractor manufacturers engaged in supply of agricultural tractors.
(2) The provisions of these rules shall apply only if the incidence of tax sought to be refunded has not been passed on to the consumers.
39P. Definition.— In this chapter, unless there is anything repugnant in the subject or context,-
(a) “agricultural tractor” means a tractor used by farmers or growers engaged in production of agricultural produce through tractor; and
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(b) “eligible person” means manufacturer of agricultural tractors who supplies tractors to a person holding a valid proof of land holding such as agriculture pass book and copy of record of rights of agricultural land duly verified from Provincial Land Revenue Authorities.
39Q. Condition on supplies of agricultural tractors.— Only eligible persons shall qualify for availing reduced rate under the Sr. No. 25 of Table-1 of the eighth schedule to the Sales Tax Act, 1990.
39R. Filing of refund application.—The eligible person shall file a refund claim through STARR/RCPS system and refund application to the Commissioner Inland Revenue having jurisdiction, along with the following documents, namely:—
(a) a copy of tax paid and e-filed sales tax return;
(b) an undertaking affirming the genuineness of refund as per Sales Tax Act, 1990 and relevant rules made thereunder;
(c) a revolving bank guarantee valid for at least one hundred and twenty days issued by a scheduled bank, to the satisfaction of the Commissioner Inland Revenue having jurisdiction of an amount not less than the average monthly refund claim during last twelve months; and
(d) name, CNIC of buyers along with valid proof of land holding, ledger of already purchased agricultural tractors against each buyer.
39S. Pre-refund audit.— Where the processing officer or the officer-in-charge is of the opinion that any further inquiry or audit is required in respect of refund claim or for any other reason to establish genuineness and admissibility of the claim, he may make or cause to make such inquiry or audit as deemed appropriate, after seeking approval from the concerned Additional Commissioner and inform the refund claimant accordingly. Audit under this rule shall be completed within thirty days of initiation of the proceedings.
39T. Refund of input tax.— The refund of admissible excess input tax shall be allowed and issued within seven days of the completion of proceedings initiated under rule 39S and in case no pre-refund audit is conducted, within fifteen days of filing of the refund claim. In any case the refund of admissible excess input tax under these rules shall not be processed through FASTER module.
39U. Filing of complete refund claim.— Within fifteen days of the sanctioning of refund, the eligible person shall file a complete refund claim along with the requisite supportive documents prescribed under Chapter V of the Sales Tax Rules, 2006.
39V. Post Refund Audit.— Post refund audit of the refund claims processed under these rules shall be carried out by the concerned division based on the documents submitted by the eligible person and any other relevant documents called by the concerned officer to ascertain the admissibility and genuineness of the refund processed and issued under rule 39T. The proceedings under this rule shall be concluded within sixty days of filing of a complete refund claim by the refund claimant under rule 39U.
39W. Cost Audit.— In order to determine that the incidence of excess input tax claimed as refund under these rules by an eligible person has not been passed on to the consumers,
(a) annual cost audit will be conducted by a Cost Accountant authorized by the Board; and
(b) cost audit for a tax year shall be conducted on the basis of twelve sales tax returns for the tax year, documents filed for refund under these rules, and any other documents called by the Cost Accountant.
39X. Amount if found inadmissible.— In case any amount already sanctioned and paid is found inadmissible, the same shall be recovered within seven days of completion of proceedings initiated under rule 39V by encashing the bank guarantee to the extent of adjudged liabilities.
39Y. Section 8B not applicable.— The provisions of sub section (1) of section 8B of the Sales Tax Act, 1990 shall not be applicable on refund claims of admissible excess input tax filed under these rules.
39Z. Repeal.— The refund claims of Recognized Agricultural Tractor Manufacturers Rules, 2012 are hereby repealed.”
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FBR introduces refund mechanism for pharma sector
ISLAMABAD: The Federal Board of Revenue (FBR) on Monday introduced mechanism for payment of sales tax refund to pharmaceutical sector.
In order to implement the mechanism the FBR issued SRO 383(I)/2022. The FBR amended Sales Tax Rules, 2006 through the instant SRO.
The government withdrew sales tax exemption on drugs through Finance (Supplementary) Act, 2022 and replaced the exemption with the zero-rated regime.
The FBR said zero-rated regime at import stage is introduced for drugs registered under the Drugs Act, 1976. Pharmaceutical goods and their raw materials were earlier exempt from Sales Tax; as a result, most of the supply chain was undocumented.
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This had led to misuse of this facility and revenue leakages. Moreover, the sector had absorbed tax paid on various inputs including packaging material and utilities. These input taxes became part of cost and were passed on to patients. In order to address these issues, pharmaceutical products are made zero rated and any tax paid on their inputs are made refundable.
This measure will bring transparency to the sector and help FBR in documenting the entire supply chain. It will also help the government in controlling and reducing the price of pharmaceutical goods. “In order to process the refund claims of this sector, a refund module on the pattern of FASTER is devised.”
Through the latest SRO, the FBR introduced a new chapter in the sales tax rules, which shall apply to refund claims for the period commencing from 15th day of January, 2022 onwards, as filed by the registered persons engaged in import or supply of zero rated drugs as registered under the Drugs Act, 1976, or medicaments as classified under Chapter 30 of the First Schedule to the Customs Act, 1969 except PCT heading 3005.0000.
Following is the text:
391. Extent of payment of refund claim.—The total amount of refund paid against the claims filed and processed under this Chapter shall not exceed the lower of the two amounts, namely, the amount of input tax actually consumed in goods as supplied at zero-rated rate, or the amount as per ceiling, if any, determined by the Board, in terms of percentage of value or amount per unit of the quantity as deemed appropriate.
39J. Filing and processing of refund claims.—The data provided in the monthly national sales tax return shall be treated as data in support of refimd claim and no separate electronic data shall be required to be provided. The amount specified in column 29 of the return, as prescribed in the form STR-7, shall be considered as amount claimed, once the return has been submitted along with all prescribed annexures thereof:
Provided that the claimant may submit his return without Annex-H and the same may be filed separately at any time but not later than one hundred and twenty days. The date of submission of Annex-H shall be considered as the date of filing of refund claim:
Provided further that the period of one hundred and twenty days, as aforesaid, may be extended for a period not exceeding sixty days, by the Commissioner having jurisdiction, for reasons to be recorded in writing on the basis of an application made by the claimant.
Risk management in refund processing.—After submission of refund claim, in the aforesaid manner, the same shall be processed by risk management system (RMS). Based on the parameters in RMS, a refund claim shall be routed to the processing module referred to as fully automated sales tax e-refund pharma (FASTER Pharma). The claims that do not fulfil RMS parameters for processing through FASTER Pharma module shall be routed for processing under Chapter V.
Processing in FASTER PHARMA module.— The claims routed to FASTER Pharma module shall be electronically processed. The data in the refund claim shall be scrutinized and verified by the system and the payable refund amount shall be determined on the basis of RMS quality check of input consumed in supplies. The refund payment order (RPO) of the amount found admissible shall be generated and the same shall be electronically communicated direct to the State Bank of Pakistan, within seventy-two hours of submission of claim, for onward advice to the respective banks for credit into the notified account of the claimant.
Processing in STARR module.— The part of the refund claim that is not verified or not found admissible shall be subjected to system validation checks every week and RPO shall be generated for the amount found valid during each validation check. After every validation process, the information regarding RPO generated, if any, as well as the objections shall be communicated by the system to the refund claimant and also to the concerned IRS field formation for information. RPO so generated shall be communicated to the State Bank of Pakistan for payment in the aforesaid manner. After eight validation checks, including the initial one, if any amount still remains un-cleared, the same shall then be processed under STARR module as referred to in Chapter V.
39N. Miscellaneous.—The provisions relating to transmission of bank advice to State Bank post-refund scrutiny, supportive documents, responsibility of claimants and action in respect of inadmissible claims, as specified in Chapter V, shall, mutatis mutandis, be applicable to refund claims filed and processed under this Chapter:
Provided, however, that supportive documents shall only be presented by the claimant, if so required by the officer-in-charge of post-refund security, with the approval of Commissioner concerned.”
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Tarin orders release refunds to edible oil importers
ISLAMABAD: Finance Minister Shaukat Tarin on Monday directed tax authorities to expeditiously release refunds to importers of edible oil importers.
He issued the directive at a meeting with a delegation of Pakistan Vanaspati Manufacturers Association (PVMA).
The finance minister directed the chairman of Federal Board of Revenue (FBR) to assure expeditious disbursement of refunds to the importers of vegetable ghee/oil to ensure availability of funds.
Federal Minister for Industries and Production Makhdoom Khusro Bakhtiar, SAPM on Finance and Revenue Dr. Waqar Masood, Secretary M/o Industries and Production, Chairman FBR and other senior officers participated in the meeting.
While welcoming the Chairman PVMA, the Finance Minister expressed his concern over the rise in the prices of edible oil/ghee in domestic markets over the period of time.
The Chairman PVMA briefed the Finance Minister about the international hike in prices of palm and soyabean oils particularly during ongoing COVID-19 pandemic. The international prices kept fluctuating between the range of $1100 – 1257 per ton and the domestic market drives rates from the prevailing international prices and the dollar value.
The exchange rate also has a significant impact on edible oil prices in the country, he added.
While taking stock of the situation, the Finance Minister urged PVMA to adopt market-based solutions and bring down prices in the domestic market in line with the international price trend.
If there is a slight dip in the international market, it must be reflected in the domestic prices so that the consumers get relief amid highly fluctuating edible oil market.
The finance minister stressed the need to evaluate the whole situation rationally and urged PVMA to come up with sustainable pricing mechanism in collaboration with the Ministry of Industries & Production and FBR.
He constituted a committee comprising representatives of PVMA, Secretary Ministry of Industries and Production and Chairman FBR to workout arrangement for streamlining collection of sales tax and a predictable pricing formula. The Chairman PVMA assured full cooperation in providing maximum relief to the domestic consumers by absorbing international pressure on prices in the edible oil sector.
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FBR’s appeal in bogus sales tax refunds rejected
An appeal of the Federal Board of Revenue (FBR) has been rejected by the President of Pakistan in issuance of bogus refund cases.
President Dr Arif Alvi on Sunday disposed of 42 representations of the FBR in cases of bogus sales tax invoices, worth over Rs 1.2 billion.
The FBR had filed the representations with the President of Pakistan assailing the orders of the Federal Tax Ombudsman (FTO) passed in suo moto cases, in which bogus sales tax refunds were reimbursed fully or partially by the delinquent officials of the FBR to the fake claimants.
The huge scam was unearthed by FBR’s Directorate General Intelligence & Investigation-Inland Revenue and the Red Alerts were issued to the concerned field formations. However, no action was initiated against the FBR officials and the fake claimants.
The FTO on taking suo moto notice of the matter had issued directions to the FBR to investigate and identify the officials involved in verification of the registered persons (RPs) and initiate a disciplinary action.
In pursuance of the FTO’s recommendations and also the previous orders of the President of Pakistan passed in similar cases, the FBR constituted six fact-finding inquiry committees to deal with 130 suo moto cases relating fake refund claims.
The Terms of Reference (ToR) of the committees were meant to identify the wrong-doings and involvement of officials in each case, and fix responsibility. Also, these committees were tasked to prepare a draft charge sheet and statement of allegations with respect to each official and submit a report to the Board within 30 days.
President Alvi, in view of the findings of the committees, disposed of the representations of the FBR pertaining to the cases in which full or partial refunds were paid fraudulently.
He directed the FBR for submission of a monthly implementation report to the Federal Tax Ombudsman’s Secretariat till the completion of the action on each case.
He also ordered to afford an opportunity of show-cause and hearing to the official in case of any departmental action proposed against him, to satisfy the requirement of due process and the principles of natural justice.
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FBR directs IR offices to dispose of all refund cases by July 31
ISLAMABAD: Federal Board of Revenue (FBR) has directed tax offices to dispose all pending refund claims by July 31, 2021.
The FBR also facilitated exporters by enhancing risk parameters for release of sales tax refunds.
In a letter to all chief commissioners of Inland Revenue, the FBR said that it had been decided to enhance refund risk parametric check from 12 percent to 15 percent of export value in cases of partially-integrated manufacturing concerns and commercial exporters.
The process for the purpose is:
That, all exporters would continue to file their refund claims through FASTER module;
That, refund claims up to 12 percent of export value will be automatically processed by FASTER system;
That, any amount exceeding 12 percent will be deferred and marked to the field office concerned for processing and sanctioning;
That, field offices will thoroughly scrutinize the claim to ascertain its admissibility and genuineness;
That, after satisfying themselves as regards the admissibility and genuineness of the refund, filed officers will sanction the refund whereby RPOs shall appear in CSTRO’s payment system in a separate especially earmarked stream;
That, CSTRO will release payment in all genuine cases falling within the range of 12 percent to 15 percent of export value;
That, no refund claims beyond 15 percent of export value would be sanctioned / paid under any circumstances.
The FBR said that all cases marked to the field involving higher refund-to-export ratio, by their very nature, are to be taken as high risk cases, and put to stringent levels, of both pre and post-refund audit so as to optimally safeguard the exchequer against any undue release on this account.
Further, the FBR directed all field formations to speedily dispose of all pending cases either accepting or rejecting the refund, but no claim, on whatever count, be kept pending beyond July 31, 2021.