THE announcement by the FBR to allow exporters of the five ex-zero rated export sectors, including the textiles and clothing industry, to refile their claims for “missing amounts” of their past sales tax refunds should be a major relief. In a circular issued earlier this week, the FBR admitted that the flaws in its Fully Automated Sales Tax e-Refunds system rolled out almost a year ago for fast-track processing and payment of export refund claims in 72 hours “simply missed out on the sales tax credits of various taxpayers”, thus stalling the processing of refund claims. The FBR claims that the flaws in FASTER have been remedied and matters regarding the processing of past missing amounts of sales tax refunds resolved. In such cases, where missing amounts could be pulled up by the system, according to the circular, the taxpayers have been asked to refile claims after adjusting refund claims and sales tax returns. In other cases, taxpayers have been asked to apply to the field formations concerned if they believe that a “material amount of their refund claims remains unaccounted for”. It is expected the officials concerned will take immediate action on their requests and sanction the claimed amount after quick examination and verification.

Exporters had been complaining about their missing amounts and unaccounted for refund claims since the automation of the system, which was causing “uncertainty and stuck-up liquidity”. The FBR, however, refused to acknowledge this issue until July when the government began to fast-track payments of outstanding sales tax claims to facilitate efforts to boost export shipments as part of the post-Covid-19 economic recovery plan. To the FBR’s credit, the exporters began receiving refunds within the stipulated timeframe of three days once FASTER design flaws were fixed. Besides automation of sales tax refunds, another area where the FBR has made significant progress in recent months, relates to the automation of the custom rebate claims of exporters for immediate payment. Nevertheless, exporters continue to face problems with regard to payment of their refund claims related to income tax and duty drawback of taxes on exports, which the FBR must sort out.

Ever since the removal of lockdown restrictions, Pakistan has significantly increased its overseas shipments, including those of textiles and clothing, and expanded its global market share taking advantage of the supply-chain disruptions in India and Bangladesh owing to the pandemic as well as China’s deteriorating trade ties with the US and Europe. The growth in export orders has infused a new confidence in exporters as many are planning substantial capacity expansion to not only retain their existing market share but also to increase it. The FBR can facilitate their growth plans by ensuring that its systems and processes do not hold back their funds and create a liquidity crunch for them.

Published in Dawn, December 11th, 2020