PTI govt orders release of Rs15b in blocked tax refunds

Parliamentarians seek reversal of 17% sales tax levied on export-oriented sector

ISLAMABAD: The federal government on Thursday ordered tax authorities to release the stuck Rs15 billion worth of exporter refunds as parliamentarians sought a reversal of the 17% sales tax imposed on the export-oriented sector due to mishandling by the tax machinery.

At least three meetings were held during the day at the finance ministry, Prime Minister’s Office and Parliament House to find solutions to the growing problems faced by the exporters after the Federal Board of Revenue’s (FBR) FASTER system was “halted due to technical glitches”.

International Monetary Fund (IMF) Resident Representative Teresa Daban also met with a delegation of exporters to find out why the FBR failed to timely release the tax refunds.

The FBR had developed the FASTER (Fully Automated Sales Tax E-Refund) system to clear exporters’ refunds within 72 hours. But the statements given by the exporters in meetings of parliamentary panels suggested that the FBR was taking seven to eight months in clearing the refunds.

Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh met with a delegation of Pakistan Textile Exporters Association (PTEA).

“Prime Minister Imran Khan has taken note of the situation and Shaikh has also given directives for the release of Rs15 billion in refunds,” said PTEA Patron-in-Chief Khurram Mukhtar.

Mukhtar said about 9,000 refund claims could not be filed due to the problems in the FASTER system. Even after the clearance of Rs15-billion refunds, about Rs35 billion would still be outstanding, he added.

Headed by Pakistan Tehreek-e-Insaf’s (PTI) Faizullah Kamoka, the National Assembly Standing Committee on Finance also took stock of the situation.

“I do not think the FBR has the capacity to pay the refunds, as against the FBR’s claim of giving refunds to the exporters in 72 hours, the results are nil,” said Kamoka.

In June last year, the federal government had imposed 17% general sales tax on all types of textile, garments, leather, surgical and sports goods. But it promised to refund the tax collected from the exporters.

The basis for revoking the zero-rating facility was the FBR’s claim that the size of local textile sales was equal to $12 billion, “which has proven wrong now”, said Pakistan Muslim League-Nawaz (PML-N) MNA Ali Pervez.

Despite being repeatedly asked by the committee members and exporters, FBR Member Operations Inland Revenue Seema Shakil did not share the net sales tax collection from the five export-oriented sectors after the withdrawal of zero-rating facility.

She also did not disclose the actual number of total outstanding sales tax and income tax refund claims which, according to some estimates, are close to Rs500 billion.

“The withdrawal of zero-rating facility was not a practical thing and the only solution to address liquidity issues of the exporters is to restore the facility,” said Sheikh Qaiser Ahmad of the PML-N.

“It is like treason that exporters are barred from taking benefit of the current global market trends due to delay in release of their tax refunds,” said Kamoka.

However, FBR Member Operations Inland Revenue Shakil insisted that the FBR was timely paying the refund claims. She said the FBR had issued a majority of cheques till the November 2019 period.

FASTER was halted for some time to allow the clearance of old refunds, said the FBR member.

She said the FBR was processing December’s refund claims. She contested the exporters’ claims about the quantum of outstanding refunds and said the actual amount was far lower than that.

Exporters were facing acute liquidity shortages due to the withholding of refunds and at least four factory owners were selling their factories, said PTEA Secretary General Azizullah Gohar.

He said the FBR’s local field formations were claiming that the FBR headquarters stopped them from clearing the refunds.

The standing committee chairman directed the FBR once again to share the details of top six recipients of tax refunds who allegedly received money due to the role played by a top chartered accountancy firm.

“I have repeatedly asked the FBR to share the details of those who were given refunds because of the role played by the chartered accountancy firm but the FBR is not sharing the data,” said Dr Ramesh Kumar of the PTI.

March 17 was the last deadline for the FBR to share the details, said Kumar, who was heading a sub-committee set up to address the exporters’ issues.

Published in The Express Tribune, March 13^th, 2020.

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