Refund bonds worth Rs7 billion issued

ISLAMABAD: The government on Friday released sales tax refund bonds amounting to Rs7 billion to exporters to help them meet liquidity crunch.

“In order to facilitate businesses, particularly exporters, and resolve the problem of long outstanding refunds, it was decided by the government to issue sales tax refund bonds to the claimants,” the finance ministry said in a statement.

FBR made necessary arrangements for issuance of bonds through the Central Depository Company (CDC). Adviser to the Prime Minister on Finance, Revenue and Economic Affairs Hafeez Shaikh transmitted the advice for issuance of bonds to the CDC system in a ceremony held at the ministry of finance.

The bonds amounting to Rs7 billion are being issued in the first tranche. “This issuance shall benefit 90 claimants,” the ministry said. The bonds have been issued to claimants who opened their account with CDC.

The finance adviser said the FBR is planning another issuance in June. He advised the claimants to exercise their option for issuance of bonds and provide their CDC accounts to FBR so that they could be accommodated in the next issuance.

Last year, the government unveiled a plan to launch negotiable security bonds worth Rs100 billion to settle the backlog of stuck sales tax refunds of more than Rs200 billion that created liquidity crunch for industries.

Former finance minister Asad Umar, presenting the mini-budget, announced to issue promissory notes to exporters, on annual profit of 10 percent with a maturity period of three years.

But, the move is expected to jack up government’s borrowings from the central bank.

The issue of flying invoices is another problem that caused multibillion rupees scam at the cost of losses to the national exchequer.

Yet, the government bodies also support the idea of issuance of bonds to immediately clear the outstanding tax payment once and for all.

Pakistan’s exporting sector has been facing immense difficulties because of liquidity crunch owing to stuck refunds of billions of rupees.

Trade Development Authority of Pakistan (TDAP) sought attention of the government towards the issue of stuck refunds.

“Delay in sales tax refunds, duty drawbacks, and tax rebates have caused a serious liquidity crunch for industrialists and exporters,” TDAP said in a latest report. “As of December 2018, textile industry alone had Rs100 billion outstanding sales tax refunds, which have not been cleared since the incumbent government came to power.”