Government to issue financial instrument against tax refunds

KARACHI: The government, withholding billions of rupees in tax refunds, plans to issue a financial instrument in two-week times to settle the long-pending sales tax refund issue, a senior official said on Thursday. 

The official, however, declined to share further details about the planned issuance. Privately, government officials said the financial instrument will be called ‘bond’ and the Federal Board of Revenue (FBR) will be the issuing authority.

“In the next week, we will be in a position to reveal the information,” one official said.

Member Inland Revenue (Operations) Dr Muhammad Irshad at the FBR told the Standing Committee of National Assembly on Finance and Revenue that the government would issue negotiable instruments to resolve the issue of sales tax refunds in the next fortnight.

The committee members were on a visit to the Federation of Pakistan Chambers of Commerce and Industry (FPCCI). 

The business community informed the committee that around Rs250 billion refunds were stuck with the FBR for the past several months.

Recently, a leading businessman disclosed that the stock of outstanding refunds had crossed Rs300 billion, which included Rs50 billion on income tax refunds.

Businessmen also said refund payment orders (RPO) had been issued around six months back in various cases. Yet, the FBR is not paying attention to the situation. According to a law, once RPO is issued, the FBR is bound to issue payment in seven days.

Dr Irshad said the ministry of finance has finalised the mechanism to issue the negotiable instruments.

On the issue of deferred cases, the member said the issue of blacklisted units was discussed at the policy board and it was decided to recommend amendment into the sales tax laws.

The business community expressed concerns over several deferred cases and denial to refunds or input adjustment in those cases where issuer of invoice was found suspended or blacklisted.

The office bearers of the FPCCI said the FBR raided factories and made arrests during the recent past. This caused anger among the business community.

Dr. Irshad said the tax officials have been barred from taking such an action against the taxpayers. 

He said the Section 40B of Sales Tax Act, 1990 would not be invoked across the board. However, the officials will exercise the provision on selected cases.

Businessmen community informed the standing committee that export and manufacturing sector was facing other taxation issues as well. The standing committee asked the FPCCI to send a detailed suggestions for the budget 2016/17.