Over Rs 50 billion inconsistency in pending refund claims

There is an inconsistency of over Rs 50 billion between the pending refund claims cited by tax authorities and those claimed by the exporters. According to the Federal Board of Revenue (FBR), the total pending refund claims of sales tax, income tax and duty drawback are around Rs 200 billion whereas exporters claim the amount is Rs 250 billion.

Zubair Motiwala, Chairman of Council of All Pakistan Textile Associations told Business Recorder that total stuck up refunds of five export sectors are around Rs 250 billion and sales tax pending refunds are around Rs125 billion which, according to FBR, are Rs 51 billion. He further said refunds claims under the heads of duty drawbacks on local taxes (DLTL) and customs rebate are also stuck up which are over Rs 120 billion.

When contacted, Shahid Sattar Executive Director All Pakistan Textile Mills Association (ATPMA stated that as far as textile sector is concerned, the pending sales tax claims are over Rs 100 billion.

FBR Member Inland Revenue (Policy) Dr Hamid Ateeq Sarwar told Business Recorder on Saturday that the FBR will pay Rs 150-200 billion refund in 2019-20. Out of this, Rs 100 billion is related to current fiscal year claims, whereas remaining Rs 100 billion cover refund claims of past years.

FBR Member IR Policy added that the inadmissible claims of exporters also include claims filed on the basis of fake and flying invoices. There are claims backed by un-verified data. The estimated figures of refund claims of exporters are highly exaggerated and based on wrong calculations and assumptions.

The sales tax refunds paid to the exporters during last fiscal year were much less (Rs 36 billion) in July-December 2018-19 as compared to Rs 103 billion during the comparable period of 2019-20.

The sales tax refunds paid in last fiscal year were less because five leading export sectors i.e. textile, leather, surgical carpets and export goods were zero-rated. In the current fiscal year, the FBR is charging 17 percent sales tax on domestic supplies of export sectors.

In percentage terms, the sales tax refunds paid in first half of 2018-19 were 65 percent less than the refunds paid in July-December (2019-20). In 2018-19, the FBR has paid total sales tax refunds of Rs 21.163 billion against Rs 70.504 billion paid in 2017-18, reflecting a decrease of 70 percent.

A senior FBR official on the condition of anonymity acknowledged that the sales tax refunds have considerably increased after imposition of 17 percent sales tax on domestic supply chain of five leading export sectors. The data of sales tax refunds paid after July 2019 cannot be compared with July 2018 when the entire export sector was zero-rated.

Exporters contested that the government is falsely comparing sales tax refund payments of 2019-20 with the period when five leading exporter sectors were zero-rated and refunds were only paid to the extent of packing material used in the manufacture of export goods.