The risk-management system of the Expeditious Refund System (ERS) is not dynamic, which needs to be improved for electronic clearance of only genuine sales tax refund claims based on the tax profiles and history of a registered person. A tax official told Business Recorder here on Saturday that the risk-management is the backbone of any system, but in case of ERS, risk-management tools are not latest and up to the mark.
The weakness of the ERS is evident from the fact that if a refund claimant had manually filed refund claim in 1992 and suddenly filed another claim after 10-12 years, the system needs to promptly check such claims. Contrary to this, the ERS cleared refund claims of such persons who suddenly resurfaced and subsequently filed claims.
During the last Chief Commissioner conference, it was pointed out that a registered person of Hyderabad had been registered with the sales tax department since 1992, but had never claimed refund under the manual system. However, as soon as the ERS was launched, the concerned person started claiming refunds. In a single case, this person of Hyderabad obtained sales tax refund of Rs 92 million under the ERS. The FBR has detected similar kinds of cases in Karachi, Lahore, Faisalabad, Sialkot and other cities where total amounts goes into billions of rupees.
The official said that there is another serious problem of overall linkage of the ERS with customs systems and processes, which still needs to be improved. For example, online linkages for confirmation of exports including short-shipment and verification of Mate Receipt (MR) have to be fully developed for proper working of the ERS. In this connection, the Federal Board of Revenue (FBR) on Saturday constituted a committee to develop a standing operating procedure (SOP) for checking possible misuse of the Expeditious Refund System (ERS).
Sources stated that the committee would develop the SOP to streamline the ERS and Post-Refund Audit (PRA). The committee would comprise Director General Strategic Planning and Statistics (SP&S), General Manager Pakistan Revenue Automation Limited (PRAL), Tanvir Ahmed, former FBR Member Tax Policy and Reforms, and Commissioner IR RTO-II Karachi, senior FBR officials of Sales Tax Wing and FBR Chief Automation.
It is important to mention that the committee would also analyse the aspect of abnormal phenomenon in the ERS where sales tax refunds have been obtained by those registered persons who have never manually claimed refunds under the old system. These registered persons for the first time claimed refunds through the electronic system and have no record of refund claims under the manual system. It is strange that how a registered person, who has never claimed refund under the manual system, but suddenly started claiming huge amounts under the electronic system. This discrepancy would be removed by the committee.
During last Chief Commissioner conference, the FBR had shared the list of hundreds of all such persons with the Chief Commissioners of Large Taxpayer Units (LTUs) and the Regional Tax Offices (RTOs) for conducting Post-Refund Audit (PRA) of such persons.