Karachi, March 7, 2024 – The Federal Board of Revenue (FBR) has issued crucial instructions to tax offices regarding the expeditious handling of deferred sales tax refund claims.
(more…)Tag: sales tax refunds
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Foreign investors demand pending refunds payment in six months
KARACHI: Foreign investors operating in Pakistan have demanded to clear all pending sales tax refunds in next six months.
Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors, in its proposals for budget 2021/2022 demanded that all pending tax refund be cleared within next six months in an orderly/ prearranged manner.
The OICCI further suggested that verification process for refunds should start automatically as soon as an application for refund is filed by the taxpayer and tax refunds should be cleared within 45 days.
With introduction of MIS on IRIS, it has become easy to introduce an online self-verification of refund. Wherein taxpayer after applying for refund verification us 170 may be given an option to select CPRNs online against each section wherein tax deduction/ collection has been made and create a virtual verification file for easy processing by assessing officers. In case of any discrepancy, only missing CPRNs will be verified manually.
It is suggested that inter adjustment of Income tax and Sales tax refunds should be made part of the law.
A timely settlement of the determined refunds should be made, and if there is a liquidity issue then issuing marketable government bonds/ securities be considered.
Amend current fixed interest rate of 10 percent to floating interest rate linked with KIBOR, it is suggested.
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FBR’s representation in bogus refunds rejected
ISLAMABAD: A representation of Federal Board of Revenue (FBR) has been rejected by the President of Pakistan on Friday that was filed against an order passed by the Federal Tax Ombudsman (FTO) in bogus refund case.
According to details, President Dr. Arif Alvi rejected the FBR’s representations directing the tax authorities to recover amount of Rs14 million paid in bogus refund claim.
The President upheld the decision of Federal Tax Ombudsman (FTO) following its suo-moto action against the irregularities committed by the FBR field formations in registering, processing, sanctioning and issuing sales tax refunds to fake refund payments during the period 2012-2013.
President Alvi in his decision wrote: “it was surprising and shocking that FBR failed to investigate fake claims where refund had already been made in full connivance with FBR officials”.
Expressing strong displeasure over the scam, he said: “How can we afford not to recover and criminally charge the fraudsters.”
The President stressed recovery of the embezzled money, saying: “instead of resistance by FBR to the suo-moto action by FTO, they should recover the precious money of the people of Pakistan.”
It is worth-stating that FBR has filed 74 similar representations with the office of the President against the orders of FTO. Out of 74 representations, 22 cases have been decided while 52 are still awaiting adjudication.
Furthermore, according to the relevant record, FBR had allowed Rs 875.277 million to be paid to fake RPs, of which a payment of Rs 223.312 Million has already been made.
The FTO in its verdict, dated April 27, 2020, had directed the Chief Commissioner-Inland Revenue and Corporate Regional Tax Office (RTO), Karachi to investigate and identify the officials involved in registration of fake RPs and initiate disciplinary/criminal action against those found involved and report compliance within 45 days.
The FTO in its decision further directed FBR to initiate appropriate action including criminal proceedings leading to recovery of amount swindled from public exchequer through claiming inadmissible input tax and bogus refund.
Instead of implementing the directives of FTO, the FBR challenged its jurisdiction and filed a representation with the President taking plea that it could not issue such orders and rely on interdepartmental correspondence of FBR.
The President rejected FBR’s representation and made it clear that the body could exercise its power conferred under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 to investigate irregularities in the department.
It is to be mentioned here that the investigations conducted by Directorate General of I&I-IR (Intelligence & Investigation and Inland Revenue), Karachi in case of M/s Z.A. Exports — a fake RP with principal activity as manufacturer of iron and steel — revealed that bogus claims worth Rs 18.519 million were made in tax period 2012-13 against irrelevant invoices.
The President lauded the Directorate General of I&I-IR (Intelligence & Investigation and Inland Revenue) for issuing Red Alerts and detecting fraudulent activities in FBR, and regretted that the “national exchequer was made to suffer colossal loss of revenue”.
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Sales Tax Refund: FBR team to brief taxpayers on filing Annexure-H
KARACHI: A team of Federal Board of Revenue (FBR) will brief taxpayers about the procedure for filing Annexure-H which is mandatory for filing sales tax refunds.
According to a circular, a technical committee of the FBR is scheduled to organize workshop/Webinar for orientation of SME manufacturers-cum-exporters and commercial exporters and tax consultants with regards to FASTER and procedure of filing of Annexure H on Wednesday January 20, 2021.
The FBR team will brief how to file annexure H for smooth refund.
Small and commercial exporters have been urged to join the workshop through Zoom meeting.
https://us02web.zoom.us/j/8083005875?pwd=ZktTS2YrOE5oM2FTTzYwd2c5Q3NVUT09
Annexure-H is a statement for providing stock position by taxpayers along with monthly sales tax return.
The FBR from July 01, 2019 introduced expeditious payment of sales tax refunds within 72 hours subject to the true filing of Annexure – H.
As per the Rules, refund will be treated as having been filed only after filing of Annexure H of the Sales Tax return, for which deadline of 120 days has been prescribed in the Rules and the same can be extended for a period of 60 days on the basis of approval from the Commissioner.
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FBR releases Rs51.5bn sales tax refunds through automated system
ISLAMABAD: Federal Board of Revenue (FBR) has released Rs51.5 billion sales tax refunds through fully automated online system since July 2020.
The FBR on Tuesday released information of release of refunds through Fully Automated Sales Tax E-Refund (FASTER) system.
As per record, since July 2019, a total of refunds amounting to Rs. 64.5 billion were claimed through FASTR System.
Out of it, refund cases of rupees Rs57 billion were processed. Out of these processed cases, refund payment of rupees 51.5 billion have been made to the exporters and businessmen so far.
The remaining unpaid refund cases have been withheld due to incomplete date provision by the exporters and businessmen.
The FBR introduced FASTER system for repayment of refunds to exporters against the deduction of taxes on their import of raw materials and other input taxes.
Through Finance Act, 2019 the sales tax zero rating was abolished for all the sectors availing the facility. However, in order to facilitate the exporters the FASTER system was introduced to make payment of their refunds within 72 hours.
FBR sources said that the tax authority had speed up the disbursement of refund payment to exporters, who were facing liquidity problems due to ongoing lockdown for prevention of coronavirus outbreak.
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FBR monitors tax refund repayments to ensure transparency
ISLAMABAD: Federal Board of Revenue (FBR) has initiated the monitoring to ensure transparency in repayment of tax refunds.
An office order circulated to all Regional Tax Offices (RTOs) and Large Taxpayers Units (LTUs), the FBR said that the prime minister had announced relief package for the industry which included tax refunds of Rs100 billion to industrial sector.
The FBR said that presently huge amount of sales tax refund claims were laying pending for replication/processing in each RTO/LTU.
The revenue body further said that in this emergency situation the genuine businesses/industries need liquidity to pay salaries to their employees.
The FBR directed the tax offices to process the sales tax refund claims immediately on urgent basis and sanction the admissible amount to the refund claimant as per law.
The FBR directed Chief Commissioner of RTOs/LTUs to monitor the process in order to maintain transparency and fairness.
The chief commissioners have also been directed to report the refund release to FBR on daily basis.
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FBR sanctions Rs56 billion sales tax refunds through FASTER
ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday said that an amount of Rs56 billion was paid as sales tax refunds to improve liquidity of exporters.
The FBR shared information about refund claims sanctioned through FASTER (Fully Automated Sales Tax e-Refund) system developed for quick processing of refunds due to exporters.
Since July 2019, Refund Claims amounting to Rs. 59 billion have been filed and FBR has sanctioned Rs. 56 billion, which comes to around 95 percent of the claimed amount.
During the month of March, FBR has sanctioned refunds of Rs. 25 billion approximately to exporters.
FASTER is a fully automated system which uses a Risk Management System for processing Sales Tax Refunds without human interference. FASTER is operational for the tax periods July and onwards.
FBR strives to make timely payment of Refunds to exporters so that they don’t face any liquidity issue.
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ECC approves Rs75 billion for repayment of tax refunds
ISLAMABAD: Economic Coordination Committee of (ECC) the Cabinet on Monday approved Rs75 billion for Federal Board of Revenue (FBR) for the repayment of tax refunds.
Adviser to the Prime Minister on Finance and Revenue Dr. Abdul Hafeez Shaikh chaired a special meeting of the ECC, which approved Rs75 billion for FBR to enable them to payback the sales tax and income tax refunds, duty drawbacks and customs duties which is due for the last 10 years.
The amount shall help approximately 676,055 beneficiaries by improving their liquidity position.
ECC also approved the supplementary grant of Rs30 billion to Ministry of Commerce to payback duty drawbacks to textile exporters in the current financial year to improve their liquidity position when their businesses are experiencing a slowdown due to worldwide outbreak of corona epidemic.
The special ECC meeting was met to fulfill the necessary requirements for different relief measures already announced by the Prime Minister for the public due to the ongoing Corona Virus Pandemic.
ECC approved the fiscal stimulus package of Rs1.2 trillion with main components as follows:
ECC approved Supplementary Grant of Rs100 billion for the “Residual/Emergency Relief Fund” in terms of article 84(a) of the constitution of Islamic Republic of Pakistan for provision of funds for mitigating the affect of COVID-19.
The special Package for providing relief to the poor through cash assistance under the Ehsaas Program was also approved by the ECC.
The package shall provide cash grants to 12 million families under the regular “kafalat program” and Emergency Cash Assistance on the recommendation of the district administration.
The assistance will be provided for four months and besides the BISP beneficiaries it will be one time dispensation, the cash will be provided either in one installment of Rs12,000 through Kafalat partner banks i.e Bank Alfalah and Habib Bank Limited after biometric verification or it may be provided in two installments of Rs6000/- each.
The Poverty Alleviation Division was asked to present both options with feasibilities.
The partner banks may be asked to make arrangements through branchless banking networks to disburse cash. Rs 72.9 billion of additional funds through technical supplementary grant would be given to BISP under “Ehsaas Cash Assistance Package in Response to COVID-19” Pandemic.
After Ministry of Industries and Production presented a comprehensive proposals regarding the targeting parameters , implementation mechanism, cash assistance per family per month and financial phasing of the program, ECC approved Rs200 billion of cash assistance for the daily wagers working in the formal industrial sector and who had been laid off as a result of COVID-19 outbreak.
It was estimated that around three million workers will fall in this category and they will have to be paid a minimum wage of Rs.17500 per month.
The estimated cost of this provision for daily wagers comes around to Rs52.5 billion a month.
The provincial labour departments shall ensure the delivery of assistance to the laborers while the provision of funds shall be the responsibility of the federal government.
ECC directed that immediate consultation with the provincial labor departments(mentioned under the provincial rules of business) may be carried out for providing timely assistance to those who are in need.
ECC approved Rs50 billion for Utility Stores Corporation to provide essential food items to the vulnerable section of the society at subsidized rates.
USC has prepared an initial plan to deliver 9 essential food items @ Rs 3000 for a family of 2+4 people through Pakistan Post Foundation Logistics Division.
USC has further planned to procure essential items within 2-3 weeks. It was directed that USC may engage with BISP to obtain data for targeted assistance and again come back to the ECC for a detailed proposal for reaching out to the poor families for the effective use of this package before making any expenditure from this amount.
ECC also allowed to reduce different taxes and duties on import and supply of different food items for alleviating the adverse impact of COVID -19 on different sections of the society.
Rate of advance tax on the import of different pulses was reduced to 0 percent from 2 percent. individuals and associations of persons providing tea, spices, dry milk and salt to USC without a brand name will pay 1.5 percent withholding tax instead of 4.5 percent.
Individuals and AoP receiving payments from USC for supplying ghee, sugar, pulses, and wheat flour shall be charged 1.5 percent withholding tax instead of 4.5 percent earlier. ACD (additional customs duty) @ 2 percent on soya bean oil, canola oil, palm oil and sunflower oil (and on these four oil seeds) has also been exempted.
ECC was briefed SBP is working on payment of claims worth Rs49 billion out of which around 40 billion will be paid by June 2020.
ECC approved supplementary grant of Rs6 billion for Pakistan Railways to meet its expenses. Pakistan Railways has suspended its passenger train services around the country since 19-3-2020.
The approved amount shall be utilized for paying salaries to 70,000 employees, repairs, paying for utilities and performing disinfectant sprays on platforms and inside trains for proving safe journey to the passengers.
Currently Pakistan Railways is earning only 1/6th of its monthly income through coal freight and the rest is suspended.
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FBR extends date to submit stock position up to March 15 for claiming refunds
ISLAMABAD: Federal Board of Revenue (FBR) has allowed taxpayers to submit their stock position for the period July – September 2019 up to March 15, 2020 in order to claim sales tax refunds under newly only verification and issuance system.
In an official memorandum issued on Thursday, the FBR condoned the time limit for filing of Annexure – H for the tax period July – September 2019 up to March 15, 2020.
Annexure-H is a statement for providing stock position by taxpayers along with monthly sales tax return.
The FBR from July 01, 2019 introduced expeditious payment of sales tax refunds within 72 hours subject to the true filing of Annexure – H.
Recently, Karachi Tax Bar Association (KTBA) highlighted this issue and urged the tax authorities to resolve for facilitating exporters and manufacturers.
The KTBA pointed out that as per the amendments made in Sales Tax Rules, 2006 vide SRO no. 918(I)/2019 dated August 7, 2019, mechanism for expeditious processing of refund claim has been devised only for manufacturers-cum- exporters.
As per the Rules, refund will be treated as having been filed only after filing of Annexure H of the Sales Tax return, for which deadline of 120 days has been prescribed in the Rules and the same can be extended for a period of 60 days on the basis of approval from the Commissioner.
However, the rules are silent about the mechanism for processing of Sales Tax refunds in case Annexure H has not been filed by manufacturer-cum-exporter for any reason. Considering the legal and legitimate right of the taxpayer to claim adjustment / refund of the input tax, either of the following two option be considered by the FBR for facilitation of exporters:
Allow filing of Annexure H without any time limit [present time limit of 4 months be abolished and taxpayer be allowed to claim refund as and when required] ii. Incase present limit of 4 months cannot be abolished, registered persons be allowed at least to alternatively file refund on annual basis after the end of the tax year.
Apart from the above, Annexure H is only being allowed to be filed to taxpayers who have filed the said Annexure from sales tax returns of July 2019 and onwards. Instead of claiming refund, some taxpayers have reported sales tax carried forward balance in their sales tax returns from July 2019 onwards. In case they now intend to file Annexure H from the current month,
FBR’s online portal does not allow such taxpayers to enter opening balance of inventory / raw materials as the said field in blocked for editing. This limitation should be removed and taxpayers should be allowed to file Annexure H for any specific month, for which they intend to claim refund.
From apparent mechanism being followed by the system, it appears that those taxpayers who have not filed Annexure H for the month of July 2019 will never be allowed to file Annexure H for any subsequent month. This apparent anomaly should be resolved at earliest.
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Criminal proceeding initiated in sales tax refunds issuance on bogus invoices
KARACHI: Regional Tax Office (RTO)-II Karachi has initiated criminal proceeding against persons involved in obtaining sales tax refunds on fake and flying invoices.
According to statement on Tuesday, the tax office had unearthed a gang of fraudsters who were engaged in tax fraud on the strength of bogus/fake/flying invoices and claimed dubious/bogus Rs230 million sales tax refunds.
The declared business activity of the units does not match with the nature of goods/raw materials against which purchases / imports have been shown and subsequently bogus inputs have been claimed.
As per chain inquiry, there were dummy buyers and only doing paper transactions.
The RTO-II Karachi lodged FBR against units included: M/s Oriental Chemcial Industries; M/s. Premier Industries/Paramount Industries; M/s. Younus Enterprises/Escord Industries.
The tax office said that the accused/owners of these bogus units were not available in the declared business address. However following measures were taken to retrieve loss of revenue by RTO-II Karachi:
(a) FIRs have been lodged against the all three accused persons/owners before special judge (customs and taxation) Karachi and criminal proceedings have been initiated under Section 37A of the Sales Tax Act, 1990.
(b) Names of owners of M/s. Oriental Chemical Industries, M/s. Paramount Industries and M/s. Escord Industries have been sent for Exit Control List (ECL).
The tax office said that all the three cases had been suspended / blacklisted under Section 21(2) of the Sales Tax Act, 1990.
It further said that the bank accounts have been attached for recover under Section 48 of the Sales Tax Act, 1990.
“Letters to all banks have also been written for getting information about the beneficiary bank accounts, whereby, cheques issued as result of the generated RPOs were deposited.”
Letters to registrar offices, Bahria Town and DHA Karachi have also been written to get information about properties/assets for recovery purpose.