ST refund bonds: SBP urged to direct banks and FIs

President, Karachi Chamber of Commerce & Industry (KCCI), Agha Shahab Ahmed Khan, has requested the State Bank of Pakistan (SBP) to issue instructions to the banks and Financial Institutions (FIs) to immediately start accepting Sales Tax Refund Bonds as the exporters must get their legitimate refunds as per provisions of section 67-A of the Sales Tax Act-1990.

In a letter sent to Governor SBP Raza Baqir dated October 19, 2019, Agha Shahab stated that timely acceptance of Sales Tax Refund Bonds would be widely welcomed by the business community as it would surely provide a huge sigh of relief to perturbed exporters who are struggling hard for survival in the ongoing era of intense competitiveness, high cost of doing business and inflation.

Agha Shahab, while drawing the attention towards the pressing issue of Sales Tax Refunds being suffered by the exporters, said that the situation has intensified the hardships for the export-oriented industries due to severe liquidity crunch, leaving no other option, but to curtail their production and somehow try to maintain their share in the existing international markets.

"The situation has worsened to such an extent that our exporters simply cannot explore any new markets to raise the exports due to lack of funds which, if not timely addressed, is likely to have a negative impact on Pakistan's economy", he added.

He said the Federal Board of Revenue (FBR) has issued bonds to the claimants and as per provisions of section 67-A of the Sales Tax Act-1990, these bonds shall be traded freely in the country's secondary markets and they will be accepted by the banks as collateral.

However, despite specific directions in the relevant Act, these bonds are neither being traded freely in the market nor being accepted by the banks, creating severe liquidity problems for the exporters who are unable to finish their export orders, hence the situation was likely to shrink the overall exports and may also result in further depreciation of the desperately Foreign Exchange reserves of the country which requires Governor State Bank's indulgence.

He stressed that the State Bank has to ensure compliance of the statutory provisions as soon as possible. Almost a month has passed so far but no relief has been provided to minimize the grievances being faced by the exporters.

He was of the opinion that the exporters were already going through the toughest time due to 'Creative destruction' which has made many Pakistani products obsolete in the international markets whereas they are terribly suffering due to high cost of doing business, stagnant industrial activities, the highest ever inflation and

many other issues particularly the stuck-up refund claims that needs to be resolved and the claimants must get their legitimate refunds on top priority.