Collectors of sales tax have informed the Central Board of Revenue (CBR) that the taxpayers are regularly filing fake claims for obtaining sales tax refunds due to ineffective STARR computer programme.
This has been admitted in the CBR quarterly review (July-September) 2006-2007 that the entire sales tax refund issuance system needs revision keeping in view complaints on regular basis, both from the taxpayers and collectors.
The major concern of the taxpayers has been delayed disposal of refunds by the tax authorities. On the other hand, the collectors' plea was that fake claims have been submitted by the taxpayers in routine. This situation has strained relations between the taxpayers and tax collectors. The implementation of STARR/STREAMS project under the tax administration reforms program made a major breakthrough in this regard.
However, since the system was not entirely foolproof, it required further changes and now a new variant system based on risk analysis is put in place. Meanwhile, the authority realised that major refund claims were submitted by the leading export sectors. To facilitate their business transactions, all inputs including raw materials of the units producing leather, textile, surgical, sports and carpets were zero- rated in 2004-2005.
In fact, 'no duty no refund' policy has been implemented. The closing balance of refund of sales tax has reduced to 4.5 billion, whereas the closing balance of income tax refund has been Rs 9.0 billion after addition of fresh institutions, the report added.