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ISLAMABAD: The Federal Board of Revenue (FBR) has issued instructions to the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) for the processing of sales tax refunds filed by non-export sectors involving multi-tax period (carry forward based refunds).

The FBR has allowed filing of carry forward-based or non-export related refunds through the RCPS at tax offices in STARR system or through Expeditious Refund System (ERS) up to June 30, 2022.

In this connection, the FBR has issued instructions to the field formations here on Saturday to remove difficulty in implementing the provisions of the rules and address refund issues faced by the registered persons.

The FBR's instructions said that the registered persons claiming non-export or input tax carry forward based sales tax refunds are required to file such claims through submission of form 7A with the submission of the sales tax return.

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The said form is not enabled and the registered persons claiming refunds under the said rules are facing difficulties in filing of refund claims through form STR-7A.

The non-export refund claims require scrutiny and cannot be processed in tandem with export-based claims through the FASTER.

The FBR has allowed filing of carry forward based or non-export related refunds through the RCPS at tax offices in STARR or through Expeditious Refund System (ERS) upto June 30, 2022, the FBR added.

According to the detail explained by a tax expert, after the inception of FASTER-refund system in July 2019 to curtail the processing time, and speed up the refund process, the sales tax refunds were connected with the filing of annex "H" of the sales tax return.

STARR system, ERS: Registered persons allowed to file non-export related refund claims

The filing of a separate refund claim was, therefore, no more required.

Under the FASTER, initially, the system only considering tax credit based on brought forward amount from refund payment order (RPO) of June 2019 or brought tax credit available in the Expeditious Refund System (ERS).

Since by and large all the claims of the routine refund claimants were not processed at the time of filing the first refund claim of July 2019 through FASTER, a large number of refund claims were stuck up in the absence of the correct amount of brought forward tax credit.

The board after several months of efforts of the trade bodies agreed to reprocess all the rejected claims applying brought forward tax credit from sales tax return of July 2019.

This initiative gave a substantial boost in clearing the FASTER pendency at that point in time and its successful implementation.

Other than routine claimants, there is another category of refund claimant having sales of both local supplies and exports.

Depending on the ratio of local/exports, usually, the taxpayers prefer to opt for input/output adjustment and brought forward the claims into the subsequent month's sales tax returns to avoid refund claims as much as possible.

However, upon the gradual increase of input tax credit or export ratio, the accumulated amount of tax credit could no more be possible to be adjusted.

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There is no provision for processing of refund claims of such occasional refund claimant through FASTER in the absence of the system's ability to accept brought forward tax credit amount from the sales tax return and therefore, all these sorts of claimants are not able to claim their accumulated amount of multi-tax period refunds.

The board through the circular dated September 8th, 2021 has now tried to address this pending issue by allowing processing of these refunds through the ERS.

It is understood that claims filed by the occasional refund claimants are rejected by the FASTER and marked to the field formation for its processing through the ERS, the tax expert explained.

He, however, apprehended that since the refund is a sensitive subject, processing such refund by the field formation is also not an easy job.

In his opinion, the board has to introduce proper SOP for processing these claims through FASTER.

According to him, the generic and system-based solution is the only way forward to address these matters, which can only be done, if the system allows the processing of refund claims taking brought forward the amount of tax credit from sales tax returns.

Copyright Business Recorder, 2021

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