FBR Install New Refund System to Boost Exports – Details

 

  • The government decided to release RS.22 billion verified sales tax refunds immediately in order to provide liquidity support to the businesses.
  • FBR is going to modify its valuation model for the determination of customs duty and other taxes levied at the import stage.
  • FBR has installed its new automated system for the exporters of five sectors.
FBR Install New Refund System to Boost Exports - Details
FBR Install New Refund System to Boost Exports – Details

The Federal Board of Revenue (FBR) released RS.22billion of verified sales tax refunds to exporters through the newly installed system.

The first payment through the new Fully Automated Sales Tax e-Refund (FASTER) system module against the refund claims for July has been made. The State Bank of Pakistan confirmed the credit of the refund amount in the claimants’ bank accounts.

Adviser to the Prime Minister on Finance Dr. HafeezShaikh shared the decision on his Twitter account that the government has taken important decisions on tax refunds for the promotion of economic activity in the country and to provide liquidity support to businesses.

The income tax refunds between Rs100, 000 and Rs500, 000 for all years will be paid next month. The government in the budget announced to expedite the payment of refunds to taxpayers.

FBR highlighted that only nine refund claims of five export-oriented sectors were received by August 30. The payment has been made against the claims that were cleared by the risk management system of the FASTER module.

Furthermore, the number of refund claims received is not significant and FBR encourages exporters to submit their claims in form Annex-H at the earliest so that their claims can be processed and paid.

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As a consequence of the rescission of SRO 1125(I)/2011 allowing zero-rating of inputs of five export-oriented sectors, FBR had committed with the exporters of textiles, leather, carpets, sports goods and surgical goods that refunds shall be paid to them within 72 hours of filing of the refund claim.

Earlier, FBR had clarified that the submission of Annex-H, which is a form in the monthly sales tax return, will be treated as submission of the refund claim.

For this, the tax body developed a new IT module called FASTER which is now operationalized. It will process claims of exporters of five the five sectors for July and onwards.

The total demand for refunds has amounted to Rs1.2 billion but the reconciled amount would be standing into millions of rupees that would be released through the FASTER system.

The new Fully Automated Sales Tax e-Refund (FASTER) system is expected to run the automatic release of genuine refunds on one side. It will also place such a safeguard mechanism that will not allow flying/fake invoices in any way.

In the past, the stuck up refunds had become a major headache for exporters because the FBR used to withhold refunds amounts to inflate its revenue collection figure but it resulted in escalating the cost of doing business in Pakistan. The exporters became uncompetitive because of stuck up refunds.

The exports could be given a boost in months and years with massive devaluation and other measures only if the refunds mechanism runs in a smooth manner. But if it hits any hitch then both exports and revenues will be at stake.

The new system will help avoid cash flow restraints faced by exporters after the withdrawal of ‘no tax no refund’ in the budget for the present fiscal year and imposition on 17% sales tax on exporters.

FBR has claimed that it will now pay sales tax refunds through the newly installed system to exporters of five sectors within 72 hours of submission of refund claims.

This is being done to cool down exporters and the government-held out an assurance to them to come up with a speedy payment system for sales tax refunds.

The new Fully Automated Sales Tax e-Refund system will issue sales tax refunds to exporters electronically by communicating refund payment orders to the State Bank of Pakistan.

The State Bank Pakistan will then forward the advice to commercial banks for claimants’ bank account within 72 hours.

The new system will also discourage to a large extent the practice of flying invoices. However, the issue of fake invoices will be controlled through the new automated system.

Under the system, some inherent benchmarks are introduced to determine the genuineness of refund claims. The new automated system will correlate taxable purchases with refund claims.

The data in the refund claims will be scrutinized and verified by the system and the payable refund amount will be determined on the basis of input consumed in exports or supplies.

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