Budget proposal 2014-2015: to speed up outstanding refunds process recommended

KARACHI: The private sector has urged the government to speed up the process of outstanding refunds within timeframe of 30 days as to ease the condition of doing business and also to attract the foreign direct investments (FDIs) in the country.
It said that fast track refunds rules must be ensured in true spirit and assessing officer should not reject the eligibility of taxpayer under any circumstances in the upcoming budget of 2014-2015.
The private sector suggested that if refunds are processed after 30 days then interest should be paid to the taxpayer on the amount held up by the Federal Board of Revenue (FBR).
It is mentioned that according to law input tax may not be claimed by a registered person on the goods in respect of which sales tax has not been deposited in the government treasury by the respective supplier. In this regard, the taxpayer should not be penalized on this unlawful activity of seller of the goods.
Although a decision had been given by Lahore High Court (LHC) for striking down the above law but it is still part of act, therefore it should be omitted.
In this regard, further recommended that withholding tax u/s 148 on import of raw materials and plant and machinery by industrial undertakings should be reduced from five percent to three percent. Furthermore, the tax commissioner may issue an exemption certificate against withholding u/s 148 to a sales tax registered manufacturer who is liable to pay advance tax u/s 147, and falls under jurisdiction of Large Taxpayers Unit (LTU).
It is believed that unnecessary delay in refund claims in working capital and financial charges for taxpayers. Timely and expeditious refund claims will build the trust of taxpayers in the tax system and will help the tax authorities while introducing tax reforms in the existing system.
It is noted that foreign investors have identified long delays in refund processing as the biggest irritant in aspects of doing business in Pakistan.
In this contrast, the World Bank Survey Report on ‘ease of doing business’ has given the very poor ranking to Pakistan.
If Pakistan has to attract the FDI then ease of doing business should be its priority and undue holding of refunds is a major contributor t o the negative perception.
It is witnessed that the regular changes in sales tax and income tax laws have distorted the system of refund claim processing. As a result huge refunds are stuck with FBR.
It said that deferment of sales tax refundable amounts, relating to imports and exports, is unjustifiable when the original bills of entry are being submitted with the sales tax refund claim, on the pretext that customs data is not available in Pakistan Revenue Automation limited (PRAL).
Similarly apart from the list of supportive documents prescribed in Rule 38 of Sales Tax Rules 2006, the department requires the refund claimants to furnish various records pertaining to their suppliers to cross match the payment of output tax in case of manual overruling.
The private sector said that under the sales tax rules a refund is to be issued after scrutiny of certain documents; however these rules do not specify any time frame for such scrutiny resulting in long delays in scrutiny/processing.
The delay in refund is also caused due to procedural issues, such as suppliers not filing their returns properly, resulting in deferment of input tax of the claimants, despite the submission of documentary evidence of sales tax payment and delays due to lack of linkage between the Federal and Provincial tax authorities. Furthermore, standing order issued by respective tax jurisdictions, for manual overruling are not been complied on one pretext or other.

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