KARACHI: The Federal Board of Revenue (FBR) has issued ‘automated objections’ in several long pending claims of sales tax refund – a move likely to dispose of major cases and also deprive genuine claimants of billion of rupees, officials sources said on Wednesday. “The tax department has started issuing system generated objection notices to the sales tax refund claimants. They are asked to produce documents to substantiate their claims,” a tax official, requesting anonymity, told The News. “In some cases even such claims have been removed from the system where evidences are not provided.” Tax experts said deferred claims of sales tax refunds are about 60-70 percent of total outstanding payable by the FBR. Sources said sales tax refunds as on December 31, 2014 were around Rs115 billion out of total Rs165 billion refund claims. They said the online system, developed by Pakistan Revenue Automation Pvt Limited (PRAL), has major flaws in cross matching of sales and purchases invoices. “There are kind of deferred claims where transactions were made with persons who were active taxpayers at that time but later they (were) either suspended or blacklisted,” an expert said. “The FBR even stopped refunds in cases where invoices were issued when the units were not blacklisted.” However, FBR officials said they are authorised to stop refund under the sales tax laws. Section 21(3) of Sales Tax Act, 1990. “During the period of suspension of registration, the invoices issued by such person shall not be entertained for the purposes of sales tax refund or input tax credit, and once such person is blacklisted, the refund or input tax credit claimed against the invoices issued by him, whether prior or after such black listing, shall be rejected through a self-speaking appealable order and after affording an opportunity of being heard to such person,” the law said. Textile manufacturers, facing serious liquidity problems due to stuck up refunds, said the latest developments clearly showed FBR intention of not paying back the claimed refunds. “This is a sort of circular debt and textile industry may not be able to sustain for a longer time,” said S M Tanveer, Chairman, All Pakistan Textile Mills Association (Aptma). Tanveer said around Rs45 billion sales tax refunds were stuck up with the FBR for a long time and in some cases for the past six years. “On average each textile mill claims Rs100 million sales tax refunds showing the severity of the situation.” Aptma chairman said instead of clearing the claims, the FBR has imposed fines and penalties for making transactions with blacklisted units. “A businessman only makes transaction when his supplier or purchaser is on the active list,” he added. The industry complained that although the FBR had issued the refund payment orders refunds were not being cleared. “The FBR is clearing those RPOs, which were issued about four months back,” said Shabbir Ahmed, Chairman, Pakistan Bedwear Exporters Association. “Our members have approached the concerned tax departments along with ample evidences but all in vain.” It is worth mentioning here that billions of rupees bogus refunds were issued on fake and flying invoices from various tax departments.
