ISLAMABAD: The exporters, except five export-oriented sectors, will now have to approach tax officers for manual processing/ verification of their sales tax refund claims, which will substantially raise physical interaction between the taxpayers and the FBR officials.
Exporters have informed the Federal Board of Revenue (FBR) that the policy shift of the board has resulted in moving away from technology and promoting manual verification and unnecessary interaction between tax officers and exporters.
In this regard, exporters have approached the FBR to raise their concerns over the manual processing of the sales tax refund claims.
According to the exporters, post withdrawal of the zero-rated regime from July 1, 2019, in order to efficiently and effectively process sales tax refund claims of exports, the FASTER system was launched. The sales tax refunds of all five erstwhile zero-rated sectors, as well as, of another category of exporters have been processed since then without any human intervention.
Surprisingly, after more than four years of smooth functioning of FASTER system, the said system has now started rejecting sales tax refund claims of exporters of other than erstwhile zero-rated goods with the following message as reason for rejection: “The FASTER system exclusively handles the sales tax refund claims filed by the exporters of five export-oriented sectors on account of export of goods, as per rule 39B of the Sales Tax Rules, 2006”.
Although Rule 39B of the Sales Tax Rules, 2006 allows processing of sales tax refunds of only five erstwhile zero-rated sectors; however, since July 2019, the FBR has been allowing processing of sales tax refund through FASTER system for other exporters, as well. Instead of restricting processing of sales tax refund through FASTER system, the FBR should have amended Rules to allow legal coverage to the existent system-based procedure in the best interest of country as the ultimate aim is to promote exports.
Due to sudden restriction on processing of sales tax refunds of other sectors through FASTER system, exporters will now have to approach tax officers for manual processing of their refund claim, which will exponentially increase taxman-taxpayer intervention.
The FBR has, since long, been proclaiming methods adopted/ to be adopted to avoid unnecessary human intervention; however, this action appears to be against the aim/ spirit of such claims.
Tax experts and exporters are unable to understand the ‘benefits’, which this action is expected to provide except for an increase in unnecessary interaction between tax officer and taxpayers, which they think will create further hurdles/ issues for genuine exporters.
Tax experts added the list of five erstwhile zero-rated sectors, textile, leather, sports, surgical and carpets was prepared around 20 years ago; however, the share of export of these goods in comparison to overall exports of Pakistan has significantly changed since then.
It is evident that during August 2023, the overall exports of carpets (falling under erstwhile zero-rated sector) were far less than many other sectors (other than erstwhile zero-rated sector). Moreover, no goods from surgical sector have been exported and the share of sports goods (along with toys) is far less than other sectors not part of the erstwhile zero-rated sectors.
Other sectors such as prepared foodstuffs, mineral products, plastic goods have exported goods far more than almost all categories (except textile) under the then zero-rated sectors.
In view of the above and considering the fact that exporters have already been facing many issues such as an exponential increase in utility prices, unstable exchange rate, and a reduction in overall demand of goods, the FBR must avoid to create any further hurdles/ bottlenecks for exporters and instead, encourage them to earn more foreign exchange for the country, which is extremely necessary during these challenging times, said the exporters.
Moreover, the method being adopted by the FBR by moving away from technology and promoting manual verification and unnecessary interaction between tax officers and exporters is beyond comprehension; therefore, the same should immediately be rectified, the exporters added.
Copyright Business Recorder, 2023