FBR misses deadline for release of Rs100b tax refunds

PM Imran Khan had promised immediate relief to improve liquidity of businesses

ISLAMABAD: The Federal Board of Revenue (FBR) has missed the deadline for releasing Rs100 billion in legacy refunds that Prime Minister Imran Khan had promised to release immediately under the economic relief package in order to provide liquidity to businesses during the lockdown period.

On the one hand, the FBR missed the deadline while on the other the finance ministry on Tuesday decided to increase the quantum of legacy refunds to Rs157 billion, which would be released under the prime minister’s economic relief package.

Since the announcement of the relief package on March 24, the FBR has issued Rs30 billion worth of tax refunds and out of those legacy refunds were only Rs21 billion, according to the officials.

Out of the Rs21 billion, Rs12 billion was released in March and the remaining this month.

As part of the relief package, PM Imran had announced immediate release of Rs100 billion in legacy tax refunds that the FBR had been withholding since 2014.

Finance Adviser Dr Abdul Hafeez Shaikh had said the government would pay Rs30 billion in refunds by March 31 and the remaining Rs70 billion by April 15. However, the FBR has missed the deadline.

The Ministry of Finance said on Tuesday the government wanted to release Rs157 billion in legacy refunds - a figure that was higher by Rs57 billion compared to the one announced by the PM.

“The government has come up with a relief package that includes Rs107 billion in sales tax refunds and Rs50 billion in income tax refunds from 2014 onwards,” said a statement the finance ministry issued after a meeting between Shaikh and the Chinese ambassador.

The government is targeting only those legacy refund claims that have been filed electronically since 2014. Before that period, the taxpayers used to submit their claims manually.

However, the government has not shown any inclination to release pre-2014 tax refunds that range from Rs150 billion to Rs170 billion, said the officials.

The PM’s decision to release taxpayers’ refunds was aimed at providing liquidity to cash-starved sectors in the aftermath of Covid-19.

The FBR has so far issued sales tax refunds of Rs20 billion out of the previous liability of Rs55 billion, leaving a balance of Rs35 billion, which will be released in coming days, according to the FBR.

Likewise, out of the previous liability of customs duty drawback amounting to Rs15 billion, Rs9.6 billion had already been paid, leaving a balance of Rs5.4 billion, which would be released very soon, stated the FBR in a statement.

The FBR claimed that it had expedited the release of sales tax refunds and customs duty drawback to the exporters and businessmen that were complying with directives of the prime minister.

However, the figures that it has released do not substantiate the claim that the FBR was honouring the commitment given by the prime minister and finance adviser.

The FBR said it would ensure that the remaining balance of previous liability of sales tax refunds and customs duty drawback worth Rs40.4 billion was paid in coming days as directed by the prime minister.

It said the FBR was committed to extending all-out cooperation to the businessmen in these trying times and recent efforts were a testimony to this fact.

The FBR said it had also expedited the issuance of refunds through FASTER (Fully Automated Sales Tax E-Refund System). As per record, since July 2019, refunds amounting to Rs64.5 billion had been claimed through the system.

Out of those, refund cases of Rs57 billion were processed. Of these processed cases, refund payment of Rs51.5 billion has been made to the exporters and businessmen so far.

The remaining refund cases had been withheld due to incomplete date provision by the exporters and businessmen, said the FBR.

A medium-sized exporter, Denim-E Private Limited, has been publicly complaining about withholding of its Rs50 million worth of export-related sales tax refunds since July. But the FBR has not paid any heed.

The company’s chief executive claimed that all documents and other formalities had been completed long ago but refunds were held up due to issues in the new FASTER system.

FASTER has been developed only for those exporters whose sales are subject to 17% general sales tax since July last year when the FBR withdrew their zero-rating facility as part of the IMF deal.

In essence, the money collected from these five export-oriented sectors should have been refunded within 72 hours, as promised by the prime minister and finance adviser. But the FBR is not doing this and showing refunds to inflate its revenue collection.

An FBR official said the IBAN number of bank accounts was missing and certain other procedural snags delayed the release of refunds. 

Published in The Express Tribune, April 15^th, 2020.

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