FBR expedites clearing blocked sales tax refunds

KARACHI: The Federal Board of Revenue (FBR) has expedited the process of sales tax refund issuance and directed tax offices to hold meetings with business representatives to resolving their liquidity issues, official sources said on Friday.
Large taxpayer units and regional tax offices, as per their jurisdiction, will hold meetings with representatives of All Pakistan Textile Mills Associations (APTMA), Overseas Chamber of Commerce and Industry (OICCI), Pakistan Business Council and American Business Council for resolving their refund claims issues.
Chairman FBR Tariq Bajwa, at a meeting on January 23 at LTU Karachi, had issued directives to the offices of Inland Revenue for reducing the pendency of blocked refunds and ensuring smooth functioning of industrial activities.
An official at LTU Karachi said the unit has issued around three billion rupees worth refunds to textile sector since July 2014. It has pendency of one billion rupees of refunds, where no objection was marked by the online system of the FBR.
He, however, said that around Rs2.4 billion refunds of the sector were deferred. The official said business representatives would be asked to advice their members for removing objections generated by computerised refund system for smooth processing.
The official said the FBR had a cautious approach in issuing refunds due to huge revenue losses through issuance of refunds against fake and flying invoices.
The FBR identified that numerous officials of Inland Revenue were found involved in the bogus refund scam. The revenue body, taking harsh stance against corruption by its official, has already ordered removal of services in few cases.
Business community said the stuck refunds, another circular debt issue, are hampering business activities and causing loss to around 0.5 percent of the gross domestic product. According to an estimate, the FBR had pendency of around Rs165 billion refunds in both sales tax and income tax.
Industry sources said despite issuance of refund payment orders (RPOs) or cheques, the FBR was not releasing cash. They said the FBR has stopped the refunds to show off revenue collection performance.
Representative of a tax department, in a case before the Federal Tax Ombudsman, admitted that the FBR deliberately stopped the issuance of refunds to meet the revenue collection target of 2013/14 fiscal year.