ISLAMABAD: The Salt Manufacturers Association of Pakistan has conveyed to the Federal Board of Revenue (FBR) that switching the sales tax refund payment system from the automated “FASTER” to a manual refund process poses a serious threat to the salt industry.
According to the letter of the association to the FBR Chairman, the matter of significant concern is related to the challenges faced by a considerable number of units in the processing of their sales tax refunds through the FASTER [Annexure H] system.
In light of the withdrawal of the zero-rated regime on July 1, 2019, the FASTER system was introduced to streamline and enhance the efficiency of processing sales tax refund claims for export-oriented industries.
The industry acknowledges and appreciates the government’s commendable initiative in promoting non-conventional products such as FASTER for sales tax refund, the sector is compelled to address the limitation of this system to only five prescribed export-oriented sectors. This exclusion results in an unintended injustice to other export-oriented industries, including the salt sector, which holds substantial potential to contribute significantly to the economic development of Pakistan.
The salt industry has witnessed notable progress and gained traction among foreign salt importers. However, the current restriction on the application of the FASTER system to only specific sectors poses a threat to the momentum of growth achieved thus far.
Regrettably, the industry has observed that, after more than four years of successful operation, the FASTER system has begun rejecting sales tax refund claims from exporters outside the prescribed zero-rated sectors, citing rule 39B of the Sales Tax Rules, 2006. This development necessitates our members to seek manual processing of sales tax refunds, introducing unnecessary taxman-taxpayer intervention and placing additional strain on the limited human resources of the FBR, it said.
The manual refund process not only extends the time required for the refund but also violates the stipulation in section 10 of the Sales Tax Act, 1990, which mandates the refund of input tax to registered persons within 45 days of filing the refund claim.
Consequently, exporters from sectors beyond the specified five export-oriented sectors face critical cash flow challenges, enduring delays of approximately four to six months in obtaining their refunds.
In an era where global practices favor the adoption of technology to expedite processes, it is disheartening to witness a reversal in Pakistan’s approach. The FBR’s insistence on slowing down the business process contradicts the prevailing global trend and imposes a severe setback to an already struggling economy grappling with unprecedented inflation.
Despite the FBR’s longstanding commitment to minimizing unnecessary human intervention, the recent actions appear to run counter to the spirit of such commitments. The anticipated benefits of this action remain unclear, except for an increase in interactions between tax officers and taxpayers, leading to additional hurdles and challenges for genuine exporters, it added.
