Exclusion from FASTER refund system: Salt industry warns FBR of ‘consequences’

ISLAMABAD: The salt industry has warned the Federal Board of Revenue (FBR) that the exclusion of salt manufacturers from the speedy/automated refund payment system (FASTER) would result in the closure of the entire salt industry in Pakistan.

A letter of the Salt Manufacturers Association of Pakistan received at the FBR has threatened the FBR of grim consequences of the exclusion of the industry from the FASTER refund system.

According to the industry, attention is diverted towards a matter of significant concern regarding the challenges faced by a considerable number of our members in the processing of their sales tax refunds through the FASTER [Annexure H] system.

In light of the withdrawal of the zero-rated regime on July 1, 2019, the FASTER system was introduced to streamline and enhance the efficiency of processing sales tax refund claims for export-oriented industries.

The industry acknowledges and appreciates the government’s commendable initiative in promoting non- conventional products such as FASTER for sales tax refund, the sector is compelled to address the limitation of this system to only five prescribed export-oriented sectors.

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This exclusion results in an unintended injustice to other export-oriented industries, including the salt sector, which holds substantial potential to contribute significantly to the economic development of Pakistan.

The salt industry has witnessed notable progress and gained traction among foreign salt importers. However, the current restriction on the application of the FASTER system to only specific sectors poses a threat to the momentum of growth achieved thus far.

Regrettably, the industry has observed that, after more than four years of successful operation, the FASTER system has begun rejecting sales tax refund claims from exporters outside the prescribed zero-rated sectors, citing rule 39B of the Sales Tax Rules, 2006.

This development necessitates our members to seek manual processing of sales tax refunds, introducing unnecessary taxman-taxpayer intervention and placing additional strain on the limited human resources of the FBR, it said.

The manual refund process not only extends the time required for the refund but also violates the stipulation in section 10 of the Sales Tax Act, 1990, which mandates the refund of input tax to registered persons within 45 days of filing the refund claim.

Consequently, exporters from sectors beyond the specified five export-oriented sectors face critical cash flow challenges, enduring delays of approximately four to six months in obtaining their refunds.

In an era where global practices favour the adoption of technology to expedite processes, it is disheartening to witness a reversal in Pakistan’s approach.

The FBR’s insistence on slowing down the business process contradicts the prevailing global trend and imposes a severe setback to an already struggling economy grappling with unprecedented inflation.

Despite the FBR’s longstanding commitment to minimising unnecessary human intervention, the recent actions appear to run counter to the spirit of such commitments. The anticipated benefits of this action remain unclear, except for an increase in interactions between tax officers and taxpayers, leading to additional hurdles and challenges for genuine exporters.

In light of the above, it is requested the FBR chairman’s intervention to enable the smooth functioning of the FASTER system and extend its benefits to all exporters without any discrimination.

Such a step would not only uphold the principles of fairness and equality but also contribute to fostering a business-friendly environment in Pakistan.

“We eagerly await your prompt response to this urgent matter,” the industry added.

Copyright Business Recorder, 2023