The Federal Board of Revenue (FBR) has drafted new sales tax refund rules for faster, automated payment of the refund claims.The rules would expedite the process of claims processing filed by manufacturers-cum-exporters of textiles and clothing, carpets, leather and leather goods, surgical instruments and sports goods on the basis of the claimants’ consumption of inputs within 72 hours of the declaration of their stocks (through form ‘H’) along with their monthly returns.
However, exporters who do not file form ‘H’ – mandatory to claim refunds – along with their monthly returns will get 120 days, extendable by another 60 days under certain conditions, to submit the form. Commercial exporters, however, will be paid their sales tax refund claims on realisation of their export proceeds, according to the draft rules.
The new system has been effective from July 1 and will become operational from next month. However, the draft is yet to be approved and notified by the FBR. The new mechanism will help avoid cash flow restraints faced by exporters’ after the withdrawal of ‘no tax no refund’ in the budget for the present fiscal year and imposition on 17 per cent sales tax on exporters. Under new rules, total amount of refund paid against claims filed and processed under new mechanism will not exceed the ceiling determined by the FBR in terms of percentage of value or amount per unit of quantity of goods exported as deemed appropriate.
“Each product category presumptive sales tax refund will be calculated in advance and fed into Risk Management System (RMS) of the FBR. Refund exceeding the presumptive ceiling will be rejected,” said a textile exporter who was briefed by the FBR on new rules.
Each refund claim will be processed by the RMS and the data will be scrutinised and verified by the system and the payable refund amount will be determined on the basis of input consumed in exports or supplies. The refund payment order (RPO) of the amount found admissible will be electronically communicated directly to the State Bank of Pakistan within 72 hours of claim submission for onward advice to the respective banks for the amount to be credited into the notified account, according the to the new rules.
Moreover, parts of the refund claims that are non-verifiable or not found admissible will be subject to system validation checks every week and the RPO shall be generated for the amount found valid during each scrutiny, according to the draft.
“After every validation process, the information regarding RPO generated, if any, as well as the objections shall be communicated by the system to the refund claimant and also to the concerned Regional Taxpayers Office or Large Taxpayers Unit for information. RPO so generated shall be communicated to the SBP for payment.