Refunds in 72 hours via FASTER system: Exporters required to submit annexure-H form: FBR

Chief Sales Tax and Federal Excise (Policy), Federal Board of Revenue (FBR), Hameed Memon has said that exporters of five leading sectors are required to submit annexure-H form (stock statement) with sales tax return for receiving sales tax refunds into their bank accounts within 72 hours under the Fully Automated Sales Tax e-Refund System (FASTER). Addressing a press conference here at the FBR House on Thursday,
Mustafa Sajjad Hassan, Member Facilitation and Taxpayer Education (FATE), and Hameed Memon informed that the FBR will start payment of sales tax refunds of around Rs 15-20 billion per month to the five export-oriented sectors in the next one to two days through the FASTER system. When SRO.1125 was in practice, the FBR had paid monthly sales tax refunds of Rs 4-5 billion. Now, it has been estimated to pay Rs 15-20 billion per month through FASTER.
Senior FBR officials ruled out possibility of creating any kind of 'escrow account' for payment of refunds to the export sectors under the FASTER. So far, 11 exporters have filed annexure-H with the return. More exporters are in the process of filing annexure-H. Exporters have a lot of queries on payment of refunds under the new system, which have been addressed by the FBR. It is expected that the refund payments would be credited into the exporters' bank accounts in the next one to two days. The refunds under the FASTER would be paid without any human intervention. The FASTER system is so fast that the refund payment order would be generated without approval of the Chief CASTRO, said the FBR Chief Sales Tax and Federal Excise (Policy).
The exporters would themselves declare about the taxable purchases and actual consumption of input goods used in exports under the stock statement to be filed under annexure-H of the sales tax monthly return. The process of filing of sales tax claim (with annexure-H) and credit of the verified amount into the exporters' bank account would take 72 hours. The experience of the FBR with the State Bank of Pakistan (SBP) shows that the SBP credits the amount into the exporters account within 24 hours of the issuance of advice by the FBR. The sales and purchase description have to be streamlined through description matching, he explained.
The FBR is optimistic that the refund amount may be credited even less than 72 hours into the exporters' bank account in future. Hameed Memon said that the FBR has fulfilled the promise of the business community for speedy payments of refunds under the new system. After withdrawal of the sales tax zero-rating facility on local sales, the major apprehension of the business community was timely payment of refunds. The issue has been timely addressed through implementation of the system of FASTER.
As soon as refund claimant files annexure-H (stock statement) with the return, the FBR will consider that the claim has been duly submitted and start possessing of refund claims through the FASTER system and the verified amount of claims would be credited directly into the exporters' account within 72 hours, the senior sales tax official stated. The FBR has also chalked out the 'internal risk-based parameters' which would be applied on refund claims.
FBR Chief Automation Tariq Shaikh said that FBR has online data of goods declarations filed by the exporters and actual exports taking place through customs stations for verification purposes. He said that 80 percent of the refund claims would fall under the FASTER system. The FBR will pay the refunds from the current revenue stream and practically FBR cannot create a dedicated head (escrow account) for refund claims. It is not possible to verify data under the separate escrow account.
To a query, the FBR senior official said that the FBR has pending sales tax refunds of around Rs 170 billion including deferred claims. The figure of pending claims of Rs 496 billion is not correct. Under the FASTER system, there is no requirement of separately filing of refund data for the export oriented sectors. All refund claims would be cleared under the FASTER, which would fall under the internal refund parameters. The said parameters would not be disclosed to the taxpayers. The upper limit/threshold ceiling of refund payment has been set at highest level to pay maximum amount of refunds to the exporters.
The level of speedy system for payment of refunds to the exporters of five leading export sectors is evident from the fact that there are no cheques involved in the system and the amount would be directly credited into the exporters' bank accounts. To a question, FBR officials said that the FBR has so far issued bonds of Rs 23 billion in lieu of sales tax refunds.
Under the new system notified by the FBR, the FBR will issue next batch of sales tax refunds to exporters of five export-oriented sectors by electronically communicating Refund Payment Orders (RPOs) to the State Bank of Pakistan within 72 hours of submission of claim for onward advice to banks for credit into the claimants' bank accounts. According to the FBR, the refund payment order (RPO) of the amount found admissible shall be generated and the same shall be electronically communicated direct to the State Bank of Pakistan, within 72 hours of submission of claim, for onward advice to the respective banks for credit into the notified account of the claimant. In case of refund claim of a commercial exporter, the payment of such refund shall be made after the realisation of export proceeds.
Hameed Memon stated that the post refund audit would be done of the refunds granted under the FASTER system. He said that the Pakistani automation system of refund payment reconciliation and verification is far better than Bangladesh model. Hameed Memon said that FBR will process refund claims through three channels on the basis of Risk Management System (RMS) of FBR's Computerised System to divide claimants in three different categories for speedy refund payments. The three refund processing channels are: Fully Automated Sales Tax e-Refund System (FASTER), Expeditious Refund System (ERS) and Sales Tax Automated Refund Repository (STARR).
Under the new rules, the refund in respect of goods exported or supplied at zero-rate shall be paid to the extent of the input tax paid on purchases or imports that are actually consumed in such goods as exported or supplied, both in respect of claim by a manufacturer-cum-exporter or a commercial exporter. After submission of refund claim, in an aforesaid manner, the same shall be processed by Risk Management System (RMS) of FBR's Computerised System. Based on the parameters in RMS, a refund claim shall be routed to any of the following three channels: Fully Automated Sales Tax e-Refund System (FASTER), Expeditious Refund System (ERS) and Sales Tax Automated Refund Repository (STARR). The claims that do not fulfill criteria for both FASTER and ERS channels shall be processed through STARR in the manner as provided in rule 29, added the chief sales tax and federal excise policy.
Under the new system, the exporters will have to file annexure-H (stock statement) along with the sales tax returns for claiming of refunds through the FASTER system. The chief sales tax said that FBR has relaxed the condition of late filing of annexure-H for the exporters even after the submission of sales tax returns.
Memon said that the new system will discourage to a large extent the flying invoices. However, he said the system will be strengthened further to overcome the practice of flying invoices. However, he clarified that fake invoices has almost controlled through the new automated system.
The FBR said that the data provided in the monthly return will be treated as data in support of refund claim and no separate electronic data will be required to be provided. The amount specified in column 29 of the return, as prescribed in the form STR-7, will be considered as amount claimed, once the return has been submitted along with all prescribed annexes thereof, he added.