ISLAMABAD: The Pakistan Business Council (PBC) has strongly recommended the Federal Board of Revenue (FBR) to allow all exporters, irrespective of any category, to avail sales tax refund facility under the FASTER system.
Moreover, the PBC has also requested the FBR to ensure that the FASTER system allows input adjustment of provincial sales tax upon verification.
In this regard, the PBC has written a letter to Aafaque Ahmed Qureshi, Member (IR-Policy) FBR.
According to the communication of the PBC to the FBR, the sales tax refunds of sectors other than five export-oriented sectors are not being processed through the “FASTER” system.
The PBC through its letter of October 24, 2023 had brought to FBR’s notice the likely impact of the ad hoc decision by the FBR to restrict FASTER based sales tax refund processing only to exporters of the five export-oriented sectors. The FBR will recall that post withdrawal of the zero-rated regime from July 1, 2019, and in order to efficiently and effectively process sales tax refund claims of exporters, the “FASTER” system was introduced. Under FASTER, sales tax refunds of all exporters irrespective of any category were being processed through an automated system.
Since October 2023, the “FASTER” has been restricted to only the five export-oriented sectors citing Rule 39B of the Sales Tax Rules, 2006 which allows processing of sales tax refunds to only five export-oriented sectors under the “FASTER” to the exclusion of the other export sectors. Export refunds of sectors other than the five export-oriented sectors since October 2023 are being done manually which increases the possibility of misuse of the manual process by unscrupulous elements both within the business community and the FBR.
The PBC has also raised the issue of adjustment of provincial input tax on services for all exporters, is being disallowed by “FASTER” system.
The input tax adjustment in respect of invoices issued by service providers registered with provincial sales tax authorities though legally allowed to be claimed as input tax, are in practice being disallowed to all exporters by the FASTER system irrespective of whether it is being automatically or manually processed. This practice is being followed despite the fact that the sales tax return portal cross verifies input tax and allows the same only once declared by the service provider. FBR vide its letter dated March 7, 2024, had directed all Chief Commissioners to allow refund against invoices issued by service providers after submission of “copy of invoice of service and proof of payment as required under section 73 of the Sales Tax Act.”
The PBC has requested the FBR bring about the necessary changes in Rule 39B of the Sales Tax Rules, 2006 to allow all exporters to avail sales tax refunds using the FASTER system and to also ensure that the FASTER system allows input adjustment of provincial sales tax upon verification, it added.
Copyright Business Recorder, 2024