ISLAMABAD: The government has issued sales tax refund bonds worth Rs7 billion for exporters to resolve the long outstanding refunds issue.

Till late on Friday night the government received 600 requests, totalling an amount of Rs45bn of which Rs7bn had been issued immediately, Minister of State for Revenue Hammad Azhar told Dawn on Friday.

“We will be issuing more as the applications are verified and processed” he said, confirming that the government will continue to issue the bonds on a rolling basis.

Adviser to the Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh transmitted the advice for issuance of bonds to the Central Depository Company (CDC) on Friday at a ceremony.

The Federal Board of Revenue (FBR) has already made necessary arrangements for issuance of bonds through the CDC. The decision to resolve the pending refunds issue through bonds was decided by the government to issue sales tax refund bonds to the claimants.

An official statement said the bonds amounting to Rs7bn are being issued in the first tranche and shall benefit 90 claimants. The bonds have been issued to claimants who had opened their account with CDC.

Shaikh said that FBR is planning another issuance in June and advised the claimants to exercise their bond option and provide their CDC accounts to the tax body so that they can be accommodated in the next issuance.

Exporters are claiming pending refunds of over Rs200bn, but the figure hasn’t been officially acknowledged by the FBR.

Guidelines for the bonds were issued by the FBR in late March. They state that the bonds carry a simple profit of 10pc per annum and will mature in 3 years. The bonds can be sold, transferred or used as collateral for bank loans. Banks have also been allowed to use the bonds as an approved security for purposes of calculating their Statutory Liquidity Reserve. Upon maturity the amount of the bond plus 30pc will be paid to the holder. The bonds are in Rs100,000 denomination and the odd amount beyond this will be issued in cash.

The bonds were introduced via an amendment in the Sales Tax Act of 1990 in the so-called mini budget of January 2019. Section 67A was inserted into the Act to introduce the scheme. The guidelines were notified on March 29. Exporters have waited since the passage of the Finance Supplementary (Second Amendment) Bill of 2019 was passed by the National Assembly on March 6. Then finance minister Asad Umar said in his speech at the time that the bill is being introduced to “boost investment in the country”.

The ceremony was attended by Minister of State for Revenue Muhammad Hammad Azhar, Secretary Finance Naveed Kamran Baloch, FBR Chairman Shabbar Zaidi and other senior officials of tax body.

Published in Dawn, June 1st, 2019