‘FASTER’ system: Jul-Nov payment of ST refunds rises 44.5pc to Rs143.8bn YoY

ISLAMABAD: The Federal Board of Revenue (FBR) has made payment of sales tax refunds of Rs143.8 billion under the ‘FASTER’ system during the first five months of current fiscal year as compared to Rs99.5 billion, reflecting an increase of 44.5 percent.

Sources said that the refund payment against all valid refund payment orders (RPOs) of the FASTER stream has been made on 1 December 2022 and there is no pendency as on 30 November 2022.

However, they added that there was a decline of around 18 percent in payment of non-‘FASTER’ sales tax refunds during July up to December 1, 2022 subsequent to payment of Rs2.3 billion against Rs2.8 billion for the same period a year before.

As per FBR data, the ‘FASTER’ payments of sales tax refund paid as on 30-June-2022 Rs279 billion against Rs195 billion for the same period a year before, reflecting an increase of 42.8 percent. The payments of sales tax refund under ‘FASTER’ from July to 1st December 2022 are Rs143.8 billion against Rs 99.5 billion, reflecting an increase of 44.5 percent.

The government has released sales tax refunds payment in the first five months of the current fiscal year.

Delay in sales tax refunds adversely affecting export cycle, says PTEA

The non-faster sales tax refund paid as on 30 June 2022 are Rs10 billion as opposed to Rs14 billion for the same period a year before, reflecting a decline of 29.2 percent and non-‘FASTER’ sales tax refund paid from July up to December 2022 are Rs2.3 billion against Rs2.8 billion, showing a decline of 17.8 percent.

The FBR said the sales tax refunds are generated as exports are zero rated under the Sales Tax Act, whereas, input is charged at standard rate of 17 percent, hence refunds are created. The Sales Tax Act restricts input tax credit to the 90 percent of the output tax. Therefore, the balance amount is carried forward. As a result of which it accumulates at the end of the year and refund is created.

Sales tax is used as subsidisation tool on utilities, fertilisers, tractors, etc. Due to this subsidised rate on output, refund is created, whereas, other refunds are created under the Section 66 – refund on account of input adjustment not claim within the relevant tax period due to inadvertence, error or misconstruction, court decides in favour of tax payer –in cases where tax has already been paid.

The ‘FASTER’ is operational since July 2019 and all refunds to exporters are processed and paid through ‘FASTER’, including five main export-oriented sectors — textile, leather, surgical goods, sports goods, and carpets.

The non-‘FASTER’ consists of refunds which are processed manually, as well as ones processed by the field formations. The main IT module of non-‘FASTER’ is STARR, which included pre-‘FASTER’ claims (before July 2019) processed through STARR by field offices and the deferred portion not verified by ‘FASTER’ is routed through STARR and processed by the field offices.

Copyright Business Recorder, 2022