Exporters set to file compensation claims against Rs 50 billion ST refunds

The exporters under the zero-rating regime are set to file compensation claims against the approved Rs 50 billion sales tax refunds pending for the last two years with the Federal Board of Revenue, sources said. According to reliable sources, the tax directors of leading exporting units from all across the country have recently consulted to the tax consultants for the remedies available to them against Rs 50 billion stuck up refunds against which FBR has issued the Refund Payment Orders (RPOs) up to the period ending on May 2016. This figure would get double if the RPOs for the subsequent period are accounted for, they added.
The tax directors have doubted the fiscal wisdom of the government, which was concerned on dwindling exports on the one hand while utilising the refunds on the other to show revenue growth. It may be noted that the FBR has shown eight percent growth in revenue last year, ie around Rs 3200 billion, which according to these circles, would fall into the negative territory had the government not blocked their genuine refunds.
One of the tax consultants, who conducted the video conference of tax directors from exporting industry told the participants that refunds ready to be paid should be paid within 45 days once the RPOs are issued as per the Sales Tax Act. He further added that the refund applicant is entitled to compensation at one percent of KIBOR under Section 67 of the Act if the payment is not made within the stipulated period.
Meanwhile, those being rejected under the Expeditious Refund System (ERS) are supposed to be processed manually by the field officers of Inland Revenue Service. However, the tax directors of these exporting units frankly expressed in the conference that the processing charges (veiled reference to corruption) tend to more than 10 percent, which a genuine refund claimant can even hardly think to pay to the functionary of the Inland Revenue System. At one point of time, they added, this speed money was not more than one to two percent.
Also, there are yet many refund claims which have not been processed at all and the files are lying unattended at the RTOs/LTUs. The tax directors explained said the senior auditors were used to attend such refund claims in the past, though obviously not free of cost, have been now been sidelined. They are replaced with by the Income Tax officers who are not well versed with the sales tax matters and are shy of taking such claims up.
They have further claimed that he FBR was also discouraging its officers from paying any attention to processing of pending refund claims while emphasising on improving revenue collections.
One of the senior IRS officers, when contacted, said the FBR does not enjoy autonomy in making payment of refunds and all the payable refunds are sent to the Ministry of Finance where the Finance Minister alone decides the fate of lucky ones. So much so, he added, the prime minister was taking it as an opportunity of claiming fame out of his announcements for payment of refunds. The prime minister has organised two gatherings of leading exporters at the PM House where he announced the payment of refunds.
In the last one, said sources, the prime minister had given a commitment to clear the entire backlog of refunds by November 2016, which is simply proved a political rhetoric. The tax experts are of a considered opinion that the core function of taxation system is to ensure timely collection of receivables and timely dispersal of payables. Unless such an approach is adopted, without any ifs and buts, there is hardly a chance for the exports to survive in a very competitive regional environment, they added.
Meanwhile, sources said the FBR has also blocked Rs 90 billion refunds under the head of income tax, which were pending since February 2016 and this figure would be much higher if refunds for the current fiscal year are added to it.