Textile exporters urge FBR to fix ‘Faster’ refund system

Textile exporters in Pakistan have raised concerns about excessive delays in processing sales tax refunds and have urged the Federal Board of Revenue (FBR) to address the flaws in the Sales Tax General Orders (STGO) and rectify technical glitches in the FBR’s sales tax faster system. According to the exporters, these delays are causing a liquidity crunch and hampering exports.

“The FBR’s sales tax ‘faster’ system was introduced to ensure that textile exporters could enjoy sales tax refunds within 72 hours, which helps them avoid a liquidity crunch and smoothen their working capital. However, the system is malfunctioning, and textile exporters are not getting their sales tax refunds,” said Ali Asif, a textile sector analyst at Insight Securities.

The Pakistan Hosiery Manufacturers & Exporters Association (PHMA) has noted misleading content in the FBR’s Sales Tax General Order No 09 of 2023, which alleged that the STGO was finalised after deliberations with PHMA and other textile associations. PHMA denied any such role as alleged by the FBR.

According to Muhammad Jawed Bilwani, the Patron-In-Chief and former chairman of PHMA, the FASTER system was fully functional and was properly processing the refund claims of exporters. Every exporter was happy with the functioning of FASTER, and taxpayers are not responsible for any glitches, if any, as it is the responsibility of the FBR.

President of Union of Small and Medium Enterprises (UNISAME) Zulfikar Thaver said, “If the FBR does not expedite claims as promised, the system is defective and it becomes tedious as funds get blocked.” He also stressed that any system made must be made with proper consultations and deliberations with stakeholders.

The FBR in its STGO 09 of 2023 has claimed that the FASTER system “continued to malfunction on multiple counts producing suboptimal outcomes and was found deficient in effectively analysing the admissibility of refund in relation to quantity and quality of inputs claimed by taxpayers, resulting in allowing portion of refund relating to such inputs which otherwise were not liable to be allowed either on the basis of excess consumption or otherwise being inadmissible under law.” However, the FBR has not given any evidence or reasoning in support of its claim, according to Bilwani.

“The PHMA participated in the FBR meeting held on March 1, 2023, assuming that the meeting was held to address the delays in processing refund claims of exporters. However, PHMA was not part of any due-deliberation to upgrade the automated system by incorporating benchmarks and input/output ratios, according to Bilwani. The exporters have urged the FBR to take swift action to address the issues and ensure a smooth and efficient system for businesses.

Published in The Express Tribune, March 31^st, 2023.

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