FBR may hold back 30pc refunds to deal with false claims: tax experts

The Federal Board of Revenue (FBR) can hold back 30 percent refund claims to deal with the problem of false claims and release its 70 percent immediately, said tax experts.
It may be noted that the federal government is pressing the Board to release refund claims immediately in the wake of COVID-19 pandemic in the country. However, FBR sources said that since 50 percent of the refund claims generally fall under the category of false claims, therefore, they are in a catch-22 situation to deal with the issue amidst a crisis-like situation.
The Board had invented a technique of making form-H cumbersome which was actually designed for fast clearance of refund claims. Accordingly, filling up the Annexure-H was difficult to the extent that it used to cause undue delays in the clearance of refunds within the prescribed period of 72 hours. For example, the requirement for the mentioning of code headings is one area where exporters face trouble.
Similarly, the import data of the export-oriented units is also not loaded in the Annexure-B of the form automatically in order to match it with the value of the raw material supplies. Furthermore, there is no provision for the adjustment of 3 percent additional sales tax in the case of unregistered buyers.
Also, there are no measurement standards for the items mentioned under each HS code which leads to a number of system glitches. In addition, the period for the filing of Annexure-H is 120 days which is not sufficient at all. Therefore, the exporters used to incur high cost in terms of the deployment of human resources and deal with intricacies relating to the Annexure-H.
Hussain Sherazi, tax consultant, said the prevailing situation in the country demands extraordinary measures from the Board. He said the Board's claim that 50 percent of the refund claims fall under the category of false claims is a bit exaggeration and the issue can be dealt with by withholding 30 percent of each claim to resolve the issue.
Shahid Malik, another tax expert, said the industry is facing the problem of paying wages to the daily wagers and the Board could hold it out by releasing refunds without delay. It is quite logical if the Board holds back 30% to avoid the influx of false claims, he added.
It may be noted that the Board has claimed that it has sanctioned Rs56 billion out of Rs59 billion refund claims since July 2019 under the Fully Automated Sales Tax e-Refund (FASTER) system, reflecting 95 percent payments. But the industry circles express their serious doubts over the claim, saying that a cumbersome form-H has caused undue delays in release of refunds on a monthly basis and they are not in a position to verify the Board's claim on individual basis.