The Federal Board of Revenue (FBR) should issue income tax refunds in all cases subject to post-refund audit following updation of IBAN account numbers of the taxpayers.
According to tax experts, contrary to relief policy of the government to issue income tax refunds, the FBR and its field formations do not appear to be on the same page with the government, and are devising ways and means to deny refunds to majority of taxpayers, apart from pick and choose, where refunds has to be issued.
Shahid Jami, a tax consultant, explained that under Rule 73(2E) of the Income Tax Rules, 2002, from tax year 2009 onwards, electronic filing of refund application was made mandatory and under Section 170(4) of the Income Tax Ordinance, 2001, commissioner was required to serve on the taxpayer decision on
refund application within 60 days of filing of refund application.
However, the decision on refund application and issuance of refund remained restricted to very influential taxpayers, and over 95 percent refund applications were never processed.
Jami pointed out that in the FBR Year Book and other statistics released, the number of pending refund applications, and the amount involved have never been mentioned though due to the electronic filing of refund applications, the figures were readily ascertainable.
When recently, businesses pointed the huge pendency of income tax refunds to the policy makers at highest level, the government issued instructions for issuance of income tax refunds as one of the relief measures for the businesses especially, the industry.
Accordingly, the finance advisor directed the FBR to issue income tax refunds of Rs50 billon within a week.
It was in this background that the FBR through its letter dated 16 April 2020 directed the chief commissioner titled as "Income Tax Refunds under Prime Minister Relief Package COVID-19" for keeping the refund orders in draft till the decision by the FBR to issue these orders, and to provide lists of verified refunds to the FBR with their IBAN Account Number for electronic issuance of refund cheques.
Jami pointed out that since number of refund application are in lacs and amount involved is many folds of Rs50 billion earmarked, therefore the FBR and its field formations are trying to categorise the refunds, and pick and choose as well.
He suggested that best practice can be that refunds on account of tax collection on imports of raw material, tax deduction on supplies, and tax collection on electricity/gas being electronically verifiable are issued to all the manufactures and the balance amount be issued after post refund audit on the pattern of post-refund audit under sales tax.
He also urged the FBR to release the figures of income tax refund applications and the amount involved, Jami added.
According to the tax authorities of the FBR, the income tax refunds have been divided into two categories/slabs. The first category/slab of income tax refunds is between Rs1 million to Rs5 million.
An amount of Rs2.1 billion income tax refunds has been processed where IBAN has been updated and would be directly credited into the bank accounts of the taxpayers.
Rs1 billion refund involve where IBAN is not updated.
The second category/slab of income tax refunds ranges between Rs5 million to Rs50 million.
The FBR has finalised the amount of Rs8 billion, which would be released to the taxpayers.
An amount of Rs700 million involves, where the IBAN has not been updated.
Overall, an amount of around Rs13 billion is ready to be issued to around 10,000 taxpayers in both the categories of income tax refunds, the FBR officials added.
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