Exporters lament delay in release of tax refunds

FBR had promised to clear refund claims within 72 hours

FAISALABAD: The commitment of the Federal Board of Revenue (FBR) to instantly release exporters’ tax refund claims seems to be just an eyewash, remarked Pakistan Hosiery Manufacturers and Exporters Association (PHMA) Central Chairman Salamat Ali.

In a statement, he voiced dismay over the imposition of 17% general sales tax (GST) on the previously zero-rated textile sector coupled with delay in release of tax refunds despite introduction by the FBR of the new Fully Automated Sales Tax e-Refund (FASTER) system.

The industry has termed the new system slower, arguing that nothing has changed in the newer system.

The PHMA central chairman pointed out that the FBR earlier claimed that it would disburse sales tax refunds through the FASTER system to the exporters of five export-oriented sectors within 72 hours of the submission of refund claims but even after a lapse of hundreds of hours, refunds had not been received.

“When the State Bank was enquired about delay in payment of approved Refund Payment Orders (RPOs) of exporters, it said refunds could not be credited unless the FBR gave such intimation in writing,” he said.

Ali expressed surprise that on the one hand, the government emphasised that it was expediting the processing of exporters’ refund claims and introduced the FASTER system while on the other hand, the SBP required necessary instructions to credit the refund amount.

Billions of rupees of exporters in sales tax refund claims are currently stuck with the FBR and as a result, they are facing a severe financial crunch and are unable to purchase inputs for manufacturing export goods.

On top of that, the running capital of exporters is shrinking due to pending refunds and they are compelled to buy raw material on credit. “Hence, the exporters are unable to quote rates to their foreign buyers,” he said.

The PHMA central chairman lamented that the exporters could not buy local inputs at zero sales tax due to the SRO 747(I)/2019 in which amendments were made in the Export Oriented Units and Small and Medium Enterprises Rules 2008.

Previously, the exporters were able to buy local inputs at zero sales tax.

He demanded that the government honour its commitment and ensure swift payments to exporters of their refund claims or restore the zero-rated sales tax system.

Published in The Express Tribune, October 5^th, 2019.

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