FBR resolves refund, adjustment issues

September 15,2019

KARACHI: The Federal Board of Revenue has resolved the issue of stuck-up refunds and adjustment under the abolished sales tax special procedure, a notification said.The sales tax special procedure...

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KARACHI: The Federal Board of Revenue (FBR) has resolved the issue of stuck-up refunds and adjustment under the abolished sales tax special procedure, a notification said.

The sales tax special procedure was abolished through the Budget 2019/20 and was no more applicable from July 1, 2019. The FBR said that in some cases refund / adjustment remained stuck up due to change in the law.

The revenue board said it has been pointed out that the goods on which sales tax has been paid under special procedures prior to July 1, 2019, were in stock on June 30, 2019, and the same would be supplied after the said date; thus, attracting sales tax under standard regime at applicable rate, subjecting the goods to double / increased incidence of tax.

Under the special procedures, input tax adjustment was not allowed. However, if such input goods, or finished goods made from these inputs, are supplied after June 30, 2019, the right of input tax is created.

Considering the problems of the taxpayers, the FBR has resolved the issue under the special procedure of sales tax.

Adjustment against goods declarations of re-meltable scrap imported prior to July1, 2019, which remained in stocks or the finished goods made thereof remained in stock on June 30, 2019, would be made available to the extent of that consumed in supplies made in July and August 2019, provided no adjustment of tax paid on such goods declarations was made against sales tax on electricity bill as was provided under the Sales Tax Special Procedures Rules, 2007, it said.

However, such adjustment would be made available, on case-to-case basis, if the commissioner concerned verifies the stock position on June 30, 2019, as declared online by such steel melters.

It also said the verification may be done by working back from current physical stocks and production and sales of intervening period after ensuring that the declared production is not below one metric ton per 800 units of electricity consumed during the intervening period. The adjustment to be allowed would not exceed the stock as so verified or the stock as declared online, whichever is lower. In case of oil and ghee mills, the FBR said adjustment would be available in respect of 16 percent FED against imports made in June, 2019, as available in stock on June 30, 2019, in the same form or in the form of finished goods, as consumed in sales made during July and August, 2019.

Adjustment would be made to the extent of sales actually made in each month, it added.

The revenue board also said if inputs on which Re1/kg FED was paid on import or local purchase and the same, or the finished goods made thereof, remained in stock on June 30, 2019, such Re1/kg becomes payment in excess if such finished goods are supplied after June 30, 2019, with the payment of due tax / FED at 17 percent.

The refund of such Re1/kg, so paid in excess, may be allowed by the field formations, under section 66, after due scrutiny and as per the law, after ensuring that the finished goods produced from such inputs have been supplied and FED payable at 17 percent has been duly accounted for in the relevant return.

Regarding additional tax on items under rescinded Sales Tax Special Procedures Rules, 2007, the FBR said adjustment would be available against invoices, showing 17 percent input tax on the purchases of specified goods during June 2019, which were in stock on June 30, 2019, and were sold in July and August 2019. These invoices, as declared in June 2019 return, would be made available for adjustment, the FBR said.

If purchases of specified goods inputs on which two percent extra tax was paid, remained in stock on June 30, 2019, the two percent extra tax becomes payment in excess if such finished goods are supplied after June 30, 2019, with the payment of due sales tax at 17 percent.

The refund of extra tax, so paid in excess, may be allowed by the field formations, under section 66, after due scrutiny and as per the law, after ensuring that the goods involved supplied and sales tax at 17 percent has been duly accounted for in the relevant return.


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