KARACHI: Sales tax refunds claims from businesses mounted to
Rs110 billion during the first seven months of the current fiscal year of
2016/17 – almost equal to the last fiscal year – despite zero-rating facility
for five export sectors, The News learnt on Monday.
Sales
tax refunds of up to Rs22 billion were settled in August 2016, followed by
another settlement of Rs21 billion for the period between June 1, 2015 and June
30, 2016 in November 2016.
“It
has been three months now since the last payments against refund claims were
made, whereas such claims have been escalating every day, triggering anxiety
among many taxpayers,” Shamim Firpo, president of the Karachi Chamber of
Commerce and Industry said. “Small exporters are facing severe liquidity crunch
due to the stuck sales tax refunds.”
Firpo
said refund claims of the last seven months of the current fiscal year have not
been cleared. He advised the tax authorities to devise an automated system to
ensure release of pending refunds on monthly or quarterly basis, which would
enable industrialists and exporters to efficiently devise their future business
expansion strategies.
The
government allowed zero sales tax rate for five export sectors on the condition
of ‘no payment – no refund’. A delegation of the Federation of Pakistan
Chambers of Commerce and Industry (FPCCI) will hold a meeting with the chairman
of the Federal Board of Revenue (FBR) next week to resolve the issue of refund
claims and fake invoices.
Shakil
Dhingra, who heads FPCCI standing committee on FBR Affairs, said the FBR and
business community will jointly remove the menace of flying or fake invoices to
plug billions of rupees leakages in sales tax. “The flying invoices are
draining around Rs100 billion of national exchequer.”
Registered
taxpayers use fake or flying invoices to claim undue refunds from the tax
department by showing excessive use of raw materials. The flying invoices have
become major problem for both the tax machinery and the industry.
The officials in the FBR also confirmed that the revenue authorities failed to
stop this.
Last
year, the FBR introduced sales tax real-time invoice verification (STRIVe) to
stop false claims of input tax and refunds. “The STRIVe has stopped the bogus
refunds and input claims but it faces problems in detecting flying invoices,”
said a FBR official on condition of anonymity. The official said introduction
of harmonised system codes in the invoice would help in preventing flying
invoices. Dhingra said the elimination of two percent additional sales tax on
supply to unregistered person would resolve the issue.
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