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Tag: sales tax refund

  • Exporters claim Rs62 billion fresh refunds stuck up despite FBR’s 72-hour clearance assurance

    Exporters claim Rs62 billion fresh refunds stuck up despite FBR’s 72-hour clearance assurance

    KARACHI: The new 72-hour sales tax refund clearance strategy of Federal Board of Revenue (FBR) has failed as another Rs62 billion refunds were stuck up since launch of the new systems, exporters said.

    Muhammad Jawed Bilwani, Chairman, Pakistan Apparel Forum in a statement on Friday said that around Rs62 billion of textile exporters liquidity held up with the government under FASTER Refund System in last 4 months, after imposition of 17 percent Sales Tax on Exports.

    Before abolishing SRO 1125 – zero percent sales tax for five export oriented industries –the government committed that sales tax refund claims payments will be paid immediately after submission of GD like Bangladesh Model.

    Contrary to Bangladesh Refund Model, Govt. launched FASTER by which sales tax refunds to be paid within 72 hours electronically. New FASTER system has been failed and FBR processing claims manually and SBP paying refund on advice of FBR.

    He said that huge amount of exporters’ liquidity of billions of rupees in Sales Tax Refund, Custom Rebate, Withholding Tax, DDT and DLTL has been stuck up with the government causing great sufferings to the already burdened exporters who are now at a loss to understand how to make both ends meet and such an alarming situation will ruin the export business of the Value Added Textile Exporters.

    On the demand of exporters, the government has withdrawn Refund Bonds electronically but payments against refund bonds have not been paid yet to the exporters, he informed.

    FBR also claimed that Custom Rebates shall be paid electronically with Export Proceeds as a result of system automation, however, the plan has not been turned into reality but previous backlog of eight months have been increased to twelve months.

    He added that due to financial hardships, Value Added Textile SMEs are not taking new export orders.

    It is pertinent to note that meager increase in the exports of value added textile sector due to previous policies of Government before Budget 2019-20.

    The impact of the policies of current Budget 2019-20 will be arrived in 2020 calendar year. It is a great irony that FBR vide SRO 747(I)/2019 dated 9th July, 2019 has withdrawn the exemption of sales tax and federal excise duty on buying of locally procured input goods by Export Oriented Units under SRO327.

    This Scheme was introduced on the pattern of Export Processing Zone (EPZ) where there is no taxes on buying of locally procured input goods and no taxes on utilities.

    Industries registered in Export Oriented Units (EOU) are liable to export 80% of their annual production. FBR should withdraw amendment to omit the clause 10 sub-section (b) and (c) of the Export Oriented Units and Small and Medium Enterprises Rules, 2008 so that exporters operating under Export Oriented Units can procure input goods without taxes as this is the safest scheme and item-wise individual analysis card is submitted in WEBOC.

    He said that exporters have a gut feeling that FBR with its harsh policies is trying to destroy value added textile export sector which is the largest export sector and labour intensive.

    It is an alarming situation that new comers are not interested in the business of export sector due to harsh incumbent government policies. Our existing Export Industry gets spillover orders from the international buyers and is surviving due to economy of scale and efficiency in the production.

    He demanded that government should clear all pending refund payments of exporters forthwith and restore zero rating (0%) of sales tax – no payment no refund regime in the best interest of exports, economy, foreign exchange earnings, employment etc.

  • ECC approves Rs30bn for redemption of sales tax refund bonds

    ECC approves Rs30bn for redemption of sales tax refund bonds

    ISLAMABAD: The government has approved Rs30 billion for redemption of sales tax refund bonds issued by the Federal Board of Revenue (FBR).

    The Economic Coordination Committee (ECC) of the Senate in a meeting yesterday took up a proposal by FBR and approved a technical supplementary grant to the tune of Rs 30 billion for the redemption of bonds issued by the “FBR Refund Settlement Company Limited” to the tune of Rs 30 billion, and payment of sales tax refunds by FBR in the form of cheques in accordance with the prescribed rules.

    The ECC also approved a proposal by the Commerce Division for declaration of the erstwhile zero-rated sectors, namely Textiles (including jute), carpets, leather, sports and surgical goods as “Export Oriented Sectors, which includes Textiles, Carpets, Leather, Sports and Surgical Goods”.

    On another proposal by the Ministry of Information Technology & Telecommunication for exemption of 8 percent minimum Income Tax for National Telecommunication Corporation, the ECC constituted a body comprising Minister for Economic Affairs Division Muhammad Hammad Azhar, Minister for Information Technology & Telecommunication Khalid Maqbool Siddiqui, Chairman Board of Investment and a representative from FBR to review the proposal and present suitable recommendations to ECC.

  • Properly filled stock statement to ensure refund in 72 hours: FBR

    Properly filled stock statement to ensure refund in 72 hours: FBR

    ISLAMABAD: Federal Board of Revenue (FBR) has said that property filled stock statement will ensure processing of sales tax refunds within 72 hours.

    The FBR said that properly filled Annex-H, which is form to provide details of stock statement, without objections and anomalies of data will ensure processing in 72 hours.

    The FBR said that Annex-H is a stock statement of input goods / services which shows flow of inputs in terms of quantity, value and sales tax involved in opening / closing balances, purchases and consumption in exports and local sales.

    Quantities / values of finished products (exports and local) and output tax on local sales should not be mentioned in Annex-H3-Use Annex H to upload for the month transactions i.e. purchase, import and Consumption only, Opening and Closing are derived /calculated automatically.

    Same is applicable for Excel file uploading otherwise objection of duplicate value will arise.

    The brought forward and carry forward tax amount in the return should match with opening balance and closing balance tax amount in the Annex-H5

    The value of purchases and input tax paid thereon in the return should match with the corresponding figures in columns “purchased / imported during the month” in Annex-H6-Generally, refund amount in column 29 of return is based on following formula:

    Refund claim=Input Tax Consumed in Exports/ Zero Rated(Col 22 of Annex-H)–Net payment against local supplies

    OR

    Refund claim = Input Tax Consumed in Exports/ Zero Rated(Col. 22 of Annex-H)+Input tax consumed in local supplies (Col. 20 of Annex-H)− Accumulated debit from monthly return (Row 17 of return)

    Mark invoice-wise inadmissible input tax for SRO 490 for accuracy in Annex-A of return

    Avoid claiming input tax credit more than once on same GD / invoice (e.g. both in provinces and FBR return)

    Credit brought forward from previous claim will be made available in opening balance in Annex-H.

    Recovery / arrears data will be made available in Annex H Declaration

    Following items relating to toll manufacturing have been added in “Item description” in Annex-H

    a.Sizing

    b.Yarn Dyeing

    c.Yarn Doubling

    d.Weaving

    e.Knitting

    f.Processing (Bleaching, Dyeing and Printing)

    g.Stitching

    h.Embroidery

  • Sales tax refund payment falls by 70 percent in last year

    Sales tax refund payment falls by 70 percent in last year

    ISLAMABAD: Federal Board of Revenue (FBR) has issued only Rs21.16 billion as sales tax refunds during last year which is 70 percent less than the preceding fiscal year.

    According to FBR’s Year Book 2018-2019, the revenue body had issued sales tax refunds amounting to Rs21.16 billion as against Rs70.5 billion in the preceding fiscal year, which recorded 70 percent decline.

    It is worth mentioning that the exporters are criticizing the FBR for holding their amount in the shape of sales tax refunds. The stuck up liquidity has created serious financial challenges to undertake production activity.

    The overall release of refunds and rebate registered 21.4 percent decline during the past fiscal year.

    The FBR issued rebate and refunds worth Rs121.63 billion during fiscal year 2018/2019 as compared with Rs154.72 billion in the preceding fiscal year.

    The issuance of refunds in direct taxes recorded 21 percent growth to Rs83.89 during the last fiscal year as compared with Rs69.46 billion in the preceding fiscal year.

    The FBR issued Rs16.57 billion as customs duty rebate during the last fiscal year, which was 12.3 percent higher than Rs14.75 billion in preceding fiscal year.

  • FBR issues guidelines to facilitate issuance of sales tax refunds in 72 hours

    FBR issues guidelines to facilitate issuance of sales tax refunds in 72 hours

    ISLAMABAD: Federal Board of Revenue (FBR) has issued guidelines to facilitate taxpayers in issuance of sales tax refunds within 72 hours.

    The FBR issued user guidelines for filing Annexure – H i.e. details of stock position of sales tax registered persons. This annexure is mandatory for refund claimants and they may submit statement within 120 days from due date of return filing of particular tax period; other registered persons are encouraged to provide these details, the FBR said.

    The FBR advised the sales tax registered persons to use Annexure – H to upload transactions for the month i.e. purchase, import and consumption only.

    Opening and closing balances are derived/calculated automatically. Same is with Excel uploading otherwise objection of duplicate value will arise.

    The FBR said that opening and closing balance in sales tax return must match with Annexure – H.

    It is further advised to sales tax registered persons to use Annexure – H column consumed / exported during the month (domestic zero rated / export for amount of refund on export mentioned in return (minus tax on local supplies).

    The FBR advised the sales tax registered persons to use column consumed / sold during the month (domestic taxable supplies) for consumption against domestic supplies in relation to output tax declared in return.

    Mark invoice wise inadmissible input tax in Annexure – A relating to SRO 490. Do not attach / claim GD of imports or/and exports that have already been claimed or not relevant.

    The FBR said that credit brought forward from previous claim will automatically be available in Annexure – H.

    The FBR added new items in list of items: sizing, yarn dyeing, yarn doubling, weaving, knitting, processing (bleaching, dyeing and printing), stitching, embroidery.

    The FBR said that RCPC for refund preparation system has been replaced with Annexure – H for all types of sales tax refund claims from July 2019 onward.

    Properly filled Annexure – H without objections and anomalies of data will ensure processing in 72 hours.

  • Post refund divisions to be set up at RTOs/LTUs to audit claims

    Post refund divisions to be set up at RTOs/LTUs to audit claims

    ISLAMABAD: Federal Board of Revenue (FBR) has decided to audit sales tax refunds by establishing ‘refund division’ at all Regional Tax Offices (RTOs) and Large Taxpayers Units (LTUs).

    According to amended Sales Tax Rules, 2006 issued by the FBR the Rule 27 has been amended to establish Centralized Sales Tax Refund Office (CSTRO), Refund Division and posting of officers.

    The FBR said that a CSTRO would be established under the Board for centralized payment of all refund amounts as due under the Act.

    Further a Refund Division will be established, which will be headed by an officer, not below the rank of Assistant Commissioner, herein after referred to as officer-in-charge, duly supported by audit staff referred to as processing officers, to examine, process and settle the refund claims filed under these rules.

    Further Post Refund Division in each RTO or LTU shall be established, which will be headed by an officer not below the rank of an Assistant Commissioner to audit the refund claims processed and sanctioned by the Refund Division.

    The FBR said that that scrutiny of the refund claims processed or sanctioned after the June 30, 2014 shall be carried out on the basis of risk-based selection through computerized Post Refund Scrutiny (PRS):

    Provided that where the Commissioner Inland Revenue has reasons to believe that a registered person, whose refund claim was processed or sanctioned, has been paid refund which was not admissible to him, he may direct through order in writing to conduct computerized Post Refund Scrutiny (PRS) of such claim.

    Post refund audit of refund claims process through RMS will be the responsibility of the audit Divisions of respective RTO/LTU.

    The registered person claiming refund under these rules shall maintain and keep all the paper documents relating to the refund claim, such as invoices, credit notes, debit notes, goods declarations, bank credit advice, etc. in his office.

  • Sale tax refunds to be released on declared stock statement: FBR

    Sale tax refunds to be released on declared stock statement: FBR

    ISLAMABAD: Federal Board of Revenue (FBR) on Monday said that refunds will be issued only on stock statement declared by sales tax registered persons.

    The FBR issued Sales Tax Circular No. 04 of 2019 to explain the issuance of refund payment under FASTER refund module.

    The FBR said that refund will be processed on the basis of entries in Annex-H.

    Annexure H is a stock statement declared by a registered taxpayer through his return.

    According to the FBR this annexure is mandatory for refund claimants and they may submit this statement within 120 days from due date of return filing of particular tax period; other registered persons are encouraged to provide these details.

    The system will show and fill the relevant columns of those items whose closing balance will be greater than zero in proceeding return, but the registered person may add the new items and provide their data manually. The column wise filing details are as follows:

    This annexure will be mandatory for refund claimants who will claim any amount of refund at serial 30 of main return and they may submit this statement within 120 days from due date of return filing of particular tax period.

    In the latest circular No. 4, the FBR said that in wake of rescission of SRO 1125(I)/2011, it had committed with the exporters of the export oriented sectors i.e. textiles, leather, carpets, sports goods and surgical goods, that refunds shall be paid within 72 hours of filing of refund claim.

    For this purpose, FASTER refund module has been developed, which will process claims of exporters of five export-oriented sectors for the tax period July, 2019, and onwards.

    FBR has earlier clarified that submission of Annex-H, which is a form in the monthly sales tax return, shall be treated as submission of refund claim.

    It is added that the number of refund claims received is not significant. The exporters are facing some difficulties in filing of their tax refund claims (Annex-H) under FASTER. Many claimants have approached the Board with request that they may be allowed revision of their return on the ground that the entries made in Annex-F do not match with those in Annex-H.

    It is accordingly clarified that refund is processed on the basis of entries in Annex-H. The entries in Annex-F have no bearing on refund claim except that carry forward of value addition tax is excluded from refund amount.

    Accordingly, the claimants are advised not to revise the returns on the ground that entries in Annex-F do not match with those in Annex-H.

    They should submit Annex-H, if not already submitted so that their claims can be processed.

    Further, field formations are advised not to draw an adverse inference if the Annex-F does not match with Annex-H in case of monthly returns already submitted.

  • SBP urged to direct banks for accepting sales tax refund bonds

    SBP urged to direct banks for accepting sales tax refund bonds

    KARACHI: The business community has urged State Bank of Pakistan (SBP) to issue directives to banks for accepting sales tax refund bonds in order to ease hardship in liquidity issues, especially for the exports.

    Karachi Chamber of Commerce and Industry (KCCI) in this regard wrote a letter to SBP Governor Reza Baqir and apprised him about the government papers, which were issued by the Federal Board of Revenue (FBR) against the stuck up refunds, but despite inclusion in the Sales Tax Act, 1990 the banks were not accepting those.

    Agha Shahab Ahmed Khan, President, KCCI in the letter said that due to liquidity crunch the exporters had no option but to curtail their production and were trying to maintain their share in the existing international market.

    “The situation has worsened to such an extent that our exporters simply cannot explore any new market to raise the exports due to lack of funds which, if not timely addressed, is likely to have a negative impact on Pakistan’s economy which is already under immense pressure and is struggling hard to narrow the current account deficit.”

    He said that the Federal Board of Revenue (FBR) has issued Bonds to the claimants and as per provisions of section 67-A of the Sales Tax Act-1990, these bonds shall be traded freely in the Country’s secondary markets and they will be accepted by the banks as Collateral.

    “However, despite specific directions in the relevant Act, these bonds are neither being traded freely in the market nor being accepted by the banks, creating severe liquidity problems for the exporters who are unable to finish their export orders, hence the situation was likely to shrink the overall exports and may also result in further depreciation of the desperately Foreign Exchange reserves of the country which requires Governor State Bank’s indulgence.”

    He stressed that the State Bank has to ensure compliance of the statutory provisions as soon as possible. “Almost a month has passed so far but no relief has been provided to minimize the grievances being faced by the exporters.”

    He was of the opinion that the exporters were already going through the toughest time due to ‘Creative Destruction’ which has made many Pakistani products obsolete in the international markets whereas they are terribly suffering due to high cost of doing business, stagnant industrial activities, the highest ever inflation and many other issues particularly the stuck up refund claims that needs to be resolved and the claimants must get their legitimate refunds on top priority.

  • Karachi Chamber expresses concerns over pathetic performance of new refund issuance module

    Karachi Chamber expresses concerns over pathetic performance of new refund issuance module

    KARACHI: President Karachi Chamber of Commerce & Industry (KCCI) Agha Shahab Ahmed Khan has expressing deep concerns over the poor and pathetic performance of the recently launched Fully Automated Sales Tax e-Refunds (FASTER) module.

    In a statement on Wednesday he stated that FBR claimed of processing payments of Sales Tax Refunds for the tax period July 2019 within 72 hours on September 2, 2019 through FASTER module but the ground reality was totally contrary to this claim as many exporters have not received anything and are running from pillar to post at various departments of FBR to get their claims processed and released.

    Agha Shahab pointed out that many exporters from different parts of the country have not received outstanding refunds for July 2019 which was really worrisome and too disappointing for the Business and Industrial Community as the FASTER module was launched with a commitment to release refunds within 72 hours but it was not happening at all, which has intensified the hardships for exporters who are finding it almost impossible to stay afloat due to delays in release of refund claims and rescission of SRO 1125(I)/2011 dated 31.12.2011, which allowed zero-rating of inputs of five export-oriented sectors.

    “It was a matter of grave concern that a system titled FASTER for processing refund claims within 72 hours, has actually made the entire process too messy and cumbersome while the FBR officers in Islamabad were also totally unaware and confused because of the so-called FASTER system hence, it should be remained as SLOWER”, he criticized.

    President KCCI said that it has been a month since the first tranche was processed via FASTER module but many exporters have not received funds, creating severe liquidity crunch for the exporters from five export-oriented industries which clearly indicates that FASTER system has failed miserably to improve the situation in fact it has made the refunds process more cumbersome and slower.

    While referring to Prime Minster’s recent meeting held to discuss economic issues and the problems being faced by business community, Agha Shahab requested PM Imran Khan, Advisor to Prime Minister Hafeez Shaikh, Minister of State for Revenue Hammad Azhar and Chairman Federal Board of Revenue Shabbar Zaidi to take notice of the hardships being faced by the perturbed exporters and issue strict directives for improving the performance of FASTER module in order to save the export oriented industries from further crises which, if not timely addressed, would certainly have a deep negative impact on Pakistan’s economy particularly in a situation when all out efforts were being made by the present government to somehow reduce the current account deficit.

    He was fairly optimistic that keeping in view the government’s resolve towards ensuring the Ease of Doing Business, the decision makers would pay attention to this serious issue and order the concerned department to improve FASTER’s performance which would certainly be warmly welcomed not only by Karachi Chamber but also by all other stakeholders from across the country.

  • FBR allows refund, adjustment under abolished sales tax special procedure

    FBR allows refund, adjustment under abolished sales tax special procedure

    ISLAMABAD: Federal Board of Revenue (FBR) has allowed refund and adjustment that are stuck up as sales tax special procedure was abolished through Finance Act, 2019.

    The FBR on Friday issued Sales Tax General Order (STGO) No. 105 for allowing adjustment / refund of sales tax paid under special procedures.

    The FBR said that through the budgetary measures for the financial year 2019-20, special procedures and other treatments for various sectors have been abolished and instead standard sales tax regime with right to input tax adjustment have been prescribed with effect from 1st July, 2019.

    It has been pointed out that the goods on which sales tax has been paid under special procedures prior to 1st July, 2019, were in stock on 30th June, 2019, and the same would be supplied after the said date, thus attracting sales tax under standard regime at applicable rate, subjecting the goods to double / increased incidence of tax.

    It has been further pointed out that under special procedures, input tax adjustment was not allowed. However, if such input goods, or finished goods made from these inputs, are supplied after 30th June, 2019, the right of input tax is created. The taxpayers have requested to provide a mechanism to avail such adjustment or for refund of tax paid in excess.

    Acknowledging the position as highlighted, the Board intends to resolve the issue as under:

    Steel Sector: Melters:

    Adjustment against GDs of re-meltable scrap imported prior to 1st July, 2019, which remained in stocks or the finished goods made therefrom remained in stock on 30th June, 2019, shall be made available to the extent of that consumed in supplies made in July and August 2019, provided no adjustment of tax paid on such GDs was made against sales tax on electricity bill as was provided under the Sales Tax Special Procedures Rules, 2007.

    However, such adjustment shall be made available, on case-to-case basis, if the Commissioner concerned verifies the stock position on 30th June, 2019, as declared online by such steel melters.

    The verification may be done by working back from current physical stocks and production and sales of intervening period after ensuring that the declared production is not below one metric ton per 800 units of electricity consumed during the intervening period. The adjustment to be allowed shall not exceed the stock as so verified or the stock as declared online, whichever is lower.

    Oil and Ghee Mills:

    Adjustment shall be available in respect of 16 percent FED against imports made in June, 2019, as available in stock on 30th June, 2019, in the same form or in the form of finished goods, as consumed in sales made during July and August, 2019. Adjustment shall be made to the extent of sales actually made in each month.

    Refund of Rs. 1 / kg paid on inputs:

    If inputs on which Rs. 1 / kg FED was paid on import or local purchase and the same, or the finished goods made therefrom, remained in stock on 30th June, 2019, such Rs. 1 / kg becomes payment in excess if such finished goods are supplied after 30th June, 2019, with payment of due tax / FED at 17 percent. The refund of such Rs. 1 / kg, so paid in excess, may be allowed by the field formations, under section 66, after due scrutiny and as per law, after ensuring that the finished goods produced from such inputs have been supplied and FED payable at 17 percent has been duly accounted for in the relevant return.

    Extra Tax Items as specified in Chapter XI of rescinded Sales Tax Special Procedures Rules, 2007:

    Adjustment shall be available against invoices showing 17 percent input tax on purchases of specified goods during June, 2019, which were in stock on 30th June, 2019, and were sold in July and August 2019. These invoices as declared in June, 2019 return shall be made available for adjustment. Adjustment shall be made to the extent of sales actually made in each month.

    Refund of 2 percent extra tax:

    If purchases of specified goods inputs on which 2 percent extra tax was paid, remained in stock on 30th June, 2019, such 2 percent extra tax becomes payment in excess if such finished goods are supplied after 30th June, 2019, with payment of due sales tax at 17 percent. The refund of extra tax, so paid in excess, may be allowed by the field formations, under section 66, after due scrutiny and as per law, after ensuring that the goods involved supplied and sales tax at 17 percent has been duly accounted for in the relevant return.

    General Guidelines:

    There shall be only one adjustment of input tax against a particular GD or invoice. In case part input tax is adjustable against a particular GD or invoice, the inadmissible amount may be reflected in Column 7 of the return. Field formations shall monitor input tax adjustments as provided herein and ensure that the same have been rightfully made.

    The adjustment shall be made against stocks on 30th June, 2019, as declared on FBR’s website. In case of any mis-declaration of such stocks, or adjustments in excess of amount of tax involved in actual stocks shall be recovered under law Adjustment / refund shall only be made in respect of suppliesas already made on payment of tax due.