Revenue Board devises sales tax refund rules for textile exporters

The Central Board of Revenue (CBR) will closely monitor issuance of sales tax refund to commercial exporters of textile products to UAE, Saudi Arabia and South Africa under the new ''Sales Tax Refund Rules 2004''.
The new refund procedure has been finalised, which may be announced by the government shortly.
Official sources told Business Recorder here on Saturday that CBR will assign high-risk ''Yellow Channel'' or ''Red Channel'' to the exporters engaged in export of textile products to UAE, Saudi Arabia and South Africa but claim sales tax refund against over-valued exports to these countries.
In case of exports to European Union (EU) and the United States of America (USA), the genuine exporters would be able to get refund within 24 hours, using ''Green Channel'' facility as per refund rules 2004.
Recently, the tax authorities found that bed-sheets and ''chaddars'' exported to South Africa and UAE were being over-invoiced as compared to identical goods exported to European Union (EU) and USA. The CBR suspects that sales tax registration numbers were issued to some exporters without due diligence, and refund was paid to selected exporters sending goods to UAE, Saudi Arabia and South Africa by raising unnecessary objections on documents of other genuine claimants.
Explaining the issue, sources referred to rule 6 of the proposed refund rules which deal with scrutiny of refund claims-On receipt of the refund claim, it shall be uploaded in Sales Tax Automated Refund Repository (STARR) computer system, which will assign it a unique claim number, process it automatically on the basis of parameters approved by the Board, and assign it to either "Green", "Yellow" or "Red" channel".
The CBR has finalised these parameters under which refund claimants would be categorised on the basis of past record, annual turnover to judge the exporter''s potential. Applying these parameters, the CBR is taking steps to verify the authenticity of export documents pertaining to South Africa, UAE and Saudi Arabia under refund procedure 2004, whereas exports to other countries will be treated as low-risk on the basis of past record of exporters.
The refund cases will be put in high/low risk categories after scrutinising computer profiles of exporters for determining whether refund should be paid promptly or after comprehensive audit.
Following this procedure, commercial exporters and manufacturers-cum-exporters will be declared as Low Risk, Medium Risk or High Risk after going through the profiles of exporters stored in ''STARR refund automation program''.
In case of any discrepancy, the CBR will transfer the exporter to ''yellow channel'' for ascertaining the admissibility of refund claim.
''Red channel'' will be allocated to exporters only in cases where pre-refund audit is necessary to verify stocks or deposit of tax for verification of claims by a senior auditor. Refund claims of a claimant found involved in tax fraud will also be assigned "Red" channel.