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On the demand of exporters, the government has withdrawn Refund Bonds electronically but payments against refund bonds have not been paid yet to the exporters, he informed.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 It is a great irony that FBR vide SRO 747(I)/2019 dated 9th July, 2019 has withdrawn the exemption of sales tax and federal excise duty on buying of locally procured input goods by Export Oriented Units under SRO327.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.

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