KARACHI: The Federal Board of Revenue (FBR) has rejected all the sales tax refund claims of commercial importers against supplies made to the export sector at a reduced rate.
The revenue body on Wednesday issued an official note to all tax offices, clarifying that commercial importers are not entitled to claim sales tax refunds in any case. Sources in the FBR said the communication was issued after an importer approached the Federal Tax Ombudsman (FTO), seeking relief against tax authorities’ refusal to entertain refund claims where higher amount of tax was paid at the Customs stage on the import of certain chemicals and supplies were made at reduced rate to the export sector.
The sources remained unable to quantify the amount of the total sales tax refund claims, but said in that particular case the claims accumulated to Rs20 million. The commercial importers are dealing with the imports of all goods, including consumed by the local market and raw material for manufacturing sector.
The sources said that SRO 1125 (I)/2011 is exclusively designed to promote exports through providing relief in the shape of zero-rate or reduced rate of sales tax. The names of chemicals has been mentioned in the SRO on which importers or manufacturers have been exempted from levy of sales tax on import.
In the case referred by the FTO to the FBR, the importers had paid 17 percent sales tax on the import of chemicals, as Customs authorities had denied reduced tax rate facility because the chemicals were not mentioned in the SRO.
However, as per the importer’s claim, the supplies made to the textile sector was made at two percent, so the differential amount or of 15 percent should be given as refund. The Sales Tax Special Procedure Rules, 2007 read as: “In no case, the refund of excess input tax over output tax, which is attributable to tax paid at the import stage, shall be refunded to a registered person.”
The sources said that only manufacturers falling under the export sector have been entitled to claim refunds in case purchase of raw material from a commercial importer was made at the normal rate of 17 percent.