Exporters find it tough to claim sales tax refund

Regret no information has been received about claims months after filling Annexure-H

Our Correspondent July 31, 2020

Exporters have highlighted that they are facing problems in claiming sales tax refunds on the Federal Board of Revenue's (FBR) newly introduced FASTER system.

Pakistan Cloth Merchants Association Chairman Ahmed Chinoy said traders were facing difficulties in claiming sales tax refunds and they had received no information about the status of their refund payments even after months of filling the Annexure-H.

The refunds were supposed to be processed within 72 hours of filling the Annexure-H.

"The refund amount to be sanctioned has been restricted to only 12% of the export value and the amount claimed over and above the threshold is being deferred or rejected," he said.

He highlighted that there was no mechanism in place to know how and when the deferred amount would be processed or refunded. He lamented that traders were kept in the dark and were not informed whether the amount would be received manually or through the FASTER system.

He termed the limit of 12% of the export value for refunds harsh, highlighting that there was no justification to treat all categories of exporters with the same criteria.

Profit margins of fabrics and scarf exporters are quite low ranging from 3% to 5% along with overhead costs, and holding back refunds of such exporters will block a huge amount of funds for them.

"Value-added textile sector having higher overhead and labour costs may get higher amount of funds, however, exporters of other sectors are suffering from this harsh decision," he said.

"Refunding exporters' claims on the basis of a restricted percentage on a monthly basis is also unfair and this should be spread over the entire year."

Echoing his views, Pakistan Hosiery Manufacturers Association (PHMA) Secretary Nijabat Ali Mughal highlighted that the association had received countless complaints pertaining to sales tax refund claims from its members.

"In this regard, we have also held online meetings with FBR's Inland Revenue Member Operations Dr Muhammad Ashfaq Ahmed and chief commissioners of Regional Tax Offices (RTOs)," he said.

In a meeting with exporters, RTO-III Karachi Chief Commissioner Dr Amir Ali Khan Talpur promised that all the legitimate pending matters of exporters with the RTO-III would be resolved on a priority basis.

During the meeting, Pakistan Apparel Forum Chairman Jawed Bilwani said the exporters were experiencing a severe liquidity crunch due to excessive delay in release of sales tax refunds.

"Billions of rupees of exporters' liquidity in sales tax refund, customs rebate and withholding tax are stuck with the government, which is causing us great suffering," he lamented.

"The present Inland Revenue member operations is highly competent, clear-headed and a man of impeccable character," said FBR spokesperson when contacted by The Express Tribune.

"He has already processed all the outstanding sales tax refund claims received through the FASTER system." The amount of sales tax refund disbursed in July 2020 was twice than that released in July 2019, he said.

Published in The Express Tribune, August 1st, 2020.

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