Rs 29 billion refunds issued to export sector, NA panel told

The government has informed the National Assembly's Standing Committee on Finance that Rs29 billion sales tax refunds had been issued to the export sector under the fast track system and remaining were also being expedited.

While briefing the meeting of the finance committee of the National Assembly, chaired by Faizullah Thursday on payment of refunds to export-oriented sectors, Member Inland Revenue Operation stated that the Federal Board of Revenue received sales tax refund claims of Rs37 billion through annexure-H (sales tax return form), Rs32 billion were processed and Rs29 billion had been paid to exporters.

The Member FBR board explained that the primary reason for the delay in payment of refund was error in data processing by the exporters and the FBR had identified focal persons in major cities to help exporters filing sales tax refunds claims with annexure-H.

The official said that the FBR had addressed all the issues on its side and now it was processing refunds claims for December 2019.

Faizullah, however, did not concur with the FBR claim and maintained that exporters had great concern and were not satisfied with the faster system of refund payments.

The representatives of textile sector chain highlighted variety of problems faced by them from higher rate of electricity and gas to tax-related issues.

Additional Secretary Finance Dr Arshad in response to the questions of the members stated that no decision had yet been taken with regard to decrease in the FBR tax collection target as discussions with the International Monetary Fund (IMF) were continuing.

He further stated that slippage in the tax collection of the FBR would be bridged through increasing non-tax revenue collection, primarily through higher profit of the State Bank of Pakistan (SBP) and other sources.

Dr Arshad added that the government was not solely banking on privatization to increase non-tax revenue.

He said that the running of civil government spending during the first seven months was Rs220 billion against the annual target of Rs440 billion with Rs30 billion saving from operational expenditure.

The government performance in terms of primary deficit is quite good and will try to remain within 7.5 percent budget deficit in the outgoing fiscal year.

Dr Arshad however, stated that the federal government had to make some expenditure management and might have to lessen development releases for slow moving projects or where utilization of funds in the projects was less.

He added that the government would strive to achieve budget deficit target of 7.5 percent agreed with the IMF.

On CNIC issue, spokesman of the FBR Hamid Attique said Pakistan's tax to GDP ratio was 9.95 percent whereas tax to GDP ratio of neighboring countries was around 17 percent and if the CNIC condition was withdrawn, there was no way in sight to broaden the tax to GDP ratio and to increase the tax collection.

Attique added that the CNIC condition was suspended for the last seven months and now it was being implemented and the FBR data shows that there was a decline in business activity due to the CNIC condition.

He stated that the Parliament had to take any decision of any change in the CNIC condition.

The committee has directed the FBR to issue instruction to the distribution companies for not deducting sales tax on electricity bills from five export-oriented sectors.

After a detailed discussion, the committee formed a three-member sub-committee with Aisha Ghaus Pasha, Nafisa Shah and Ramesh Kumar on the issues highlighted by the textile industry, stating that export sector was very important for the country.

Finance Division officials, while giving briefing to the committee on allocation of share of each provincial government in the proceeds of divisible federal taxes, stated that the FBR tax collection till January 31, 2020 was Rs2,369 billion, while there were also last year arrears of Rs28. Thus the total tax collection in divisible including arrears stood at Rs2,397 billion.

Of the total collection in divisible pool, Rs1,501 billion have been transferred to the provinces with Rs746 billion to the Punjab, Rs354 billion to Sindh, Rs236 billion to Khyber-Pakhtunkhwa (KP) and Rs164 billion to Balochistan.

The federal government also transferred Rs4.6 billion to the Punjab, Rs34.2 billion to Sindh, Rs16.9 billion to the KP and Rs8.7 billion to Balochistan.

The committee expressed its concern over holding back releases of provincial share in taxes from divisible pool and decided to convene another meeting with the provinces to take briefing from them on spending as well as affectivity of provincial finance commission.

Finance Secretary of Punjab informed the committee that the provinces had committed Rs233 billion budget surplus to the federal government.