Sales tax refunds: Exporters concerned at delay in payment

Exporters have expressed serious concern over prolonged delay in payment of sales tax refunds under the newly introduced system, "Faster", of the Federal Board of Revenue (FBR). According to the FBR's data, out of total refund claims of Rs24.281 billion filed under the Faster system, the FBR has paid Rs16.480 billion sales tax refund to the textile sector up to January 15, 2020.

Pakistan Bedwear Exporters Association Chairperson Shabir Ahmed, while talking to the Business Recorder, stated that the small and medium export industries were facing serious liquidity crunch due to slow processing of refunds under the Faster system. The prime minister has promised to facilitate the small and medium export industries, but the situation is worsening for these industries.

He said that despite the FBR's tall claim that it would now pay sales tax refunds through the newly installed system to exporters of five sectors within 72 hours of submission of refund claims, sales tax refunds had not been paid yet.

Billions of rupees of exporters, in sales tax, have held up with the FBR as a result they have been facing severest financial hardships and are unable to procure materials/inputs for manufacturing goods meant for exports. Ahmed said, "I have to rush to Europe due to delay in shipment of export orders and will meet foreign buyers to convince them about the situation in Pakistan. In the absence of working capital and blockage of refunds, we are unable to meet export orders."

Shabir Ahmed stated that the government was comparing refunds payment data of July-January (2019-2020) to the same period of 2018-2019 when five leading export sectors were sales tax zero-rated. Due to zero-rating no refunds were generated except some refunds paid on packing materials used in export items.

The government claims that higher amount of refunds have been paid in 2019-2020 compared to the last fiscal year. The factual status is that the zero-rated sectors including textile have now been brought into the normal sales tax regime from July 1, 2019.

It is not justified to compare data of 2018-2019 when less amount of refunds were generated as compared to 2019-2020 when refund claims are filed with the FBR after payment of 17 percent sales tax on domestic supplies, he added. According to the FBR, in the wake of rescission of SRO 1125(I)/2011, the FBR had committed with the exporters of the export-oriented sectors, i.e. textiles, leather, carpets, sports goods and surgical goods that refunds shall be paid to them within 72 hours of filing of refund claim.

For this purpose, FASTER refund module has been developed, which is supposed to process claims of exporters of five export-oriented sectors for the tax period July 2019 and onwards.