Tractor industry: FBR not following timelines in processing refund claims, says FTO

ISLAMABAD: Federal Tax Ombudsman (FTO) Dr Asif Mahmood Jah observed on Tuesday that the timelines given in the Recognized Agricultural Tractors Manufacturers Rules, 2006 are not being followed by the Federal Board of Revenue (FBR) while processing/sanctioning sales tax refund claims of the tractor industry.

According to an order of the FTO issued on Tuesday, the delay in processing/sanctioning due refund claims and consequently, delay in transfer of sanctioned amount to Tractor Industry Claimants’ bank accounts, as per timelines, prescribed vide SRO.363(I)/2012 dated 13.04.2012, is tantamount to maladministration in terms of Section 2(3) of the FTO Ordinance, 2000.

The FBR will direct all Chief Commissioners Inland Revenue holding jurisdiction over sales tax affairs of tractor industry to strictly comply with timelines under SRO.363(I)/2012 for processing due refund claims, FTO directed the FBR.

The FTO took notice that entire tractor manufacturing industry is facing severe liquidity crunch as the industry’s over Rs8 billion Sales Tax refunds are stuck up with FBR for last two years. The industry pays 17 percent Sales Tax to its vendors from whom it purchases parts. It is allowed to pass on only five percent Sales Tax to the buyers and FBR has to refund rest 12 percent to the tractors manufacturers. This differential, in case of one unit alone i.e. M/s Millat Tractors (Claimant), touched Rs6 billion. This scenario left no choice for the manufacturer but to suspend operations to save itself from future losses. M/s Millat Tractors Limited approached Federal Tax Ombudsman Secretariat for redressal of this systemic issue with the request that FTO may intervene in this matter for expeditious disposal of long pending refund claims of tractor industry.

The Own Motion Complaint was referred to the Secretary, Revenue Division, Islamabad in terms of Section 10(4) of the FTO Ordinance, read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013.

FTO order added that the arguments of both sides heard and available record perused. Claimant’s (M/s Millat Tractors) contention that Department had not processed/sanctioned due refund within three days as prescribed under Recognized Agricultural Tractors Manufacturers Rules, 2006, issued vide SRO.363(I)/2012 dated 13.04.2012, is correct.

Subject to filing of refund application, pursuant to Rule 2 of SRO 363(I)/2012 dated 13.04.2012, refund of admissible excess input tax is to be allowed within three days. Subject to Rule 4, Claimant is required to file complete refund claim alongwith requisite supportive documents within 15 days of sanctioning of refund. In case, any amount already sanctioned and paid is found inadmissible, the same is recoverable within seven days by encashing the bank guarantee to the extent of adjudged liabilities. It appears that timelines, given in prescribed procedure, are not being followed in letter and spirit while processing/sanctioning refund claims of the tractor industry, FTO added.

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