FBR-provinces controversy irks exporters
SOHAIL SARFRAZ
ISLAMABAD: Exporters of textile sector are facing both Federal Board of Revenue (FBR) and provincial revenue authorities on the issues of applicability and chargeability of sales tax on certain goods/services under provincial laws and FBR sales tax laws.
It is learnt that the issue of conflict of federation and provinces on sales tax was discussed during the last meeting of Pakistan Textile Exporters Association (PTEA) with FBR officials under the chairmanship of Haroon Akhtar Khan, special Assistant to the Prime Minister on Revenue.
The industry submitted that the issue of applicability and chargeability of sales tax on certain goods/services has cropped up since promulgation of Provincial Services Acts 2011, 2012, 2014 and 2015. The controversy is yet to be resolved between Federation and provinces. However, the exporters are being victim between the Federation and Provinces as notices of the provincial revenue authorities for registration under the respective sales tax on services and provincial sales tax on services (withholding) rules are being received.
FBR Officials informed that on this specific issue, dialogues with provincial Government are under way and the matter will be resolved later.
It was submitted that during previous meetings, it was decided to constitute tax reforms committees both at central and regional levels comprise of Officer of Inland Revenue and representative of exporters / business Associations to look in to the matters irritating exporters and business community. No committee has yet been constituted till date, association said.
FBR officials agreed to immediately constitute a central tax reforms committee comprising of three members from the Association and one member from FBR not less than the rank of Member of FBR/Board. However, tax reforms committees at regional level will be constituted after the visit of Member IR (Operations) to PTEA later.
It was pointed out by the association that cheques for disbursement of amount of refunds sanctioned through Expeditious Refund System (ERS) are invariable issued after a period of six months from the date of issuance of refund payment order (RPO). It was time and again requested that there is no justification for such delay. The cheques have been issued in respect of RPOs issued till 31.05.2015. All RPOs issued after 31.05.2015, till to date are pending for issuance of cheques. PTEA’S tax consultant pointed out that all data is submitted with returns but still for refund it is to be submitted separately which serves no purpose.
FBR Officials explained that in view of severe financial position, Government is considering to give status of negotiable financial instrument to the RPOs. Furthermore, efforts for speedy processing of refunds will be initiated.
Exporters pointed out that in ERS, a capping of upper limit has been applied in the system and any refund exceeding the prescribed limit is automatically disqualified for electronic processing and is deferred and sent to concerned RTO/LTU. This upper limit has been determined keeping in view the rate of sales tax paid by exporters. An upper limit of 3.5% was assigned to the system prior to Finance Act, 2015. During the previous meetings, it was decided that the same will be enhanced to 4.5% due to rise in the sales tax rate from 2% to 3% for textile sector. However, the same has not been increased as yet and refund claims of the exporters are still being rejected due to capping andexporters are not filing their refund claims for the period July-2015 onwards due to fear of rejection by ERS. It was further pointed out that in addition to all 1% additional customs duty has been imposed on all imports which will further add certain amount under the head of ‘sales tax’.
FBR officials informed that FBR has decided to increase the capping of upper limit from 3.5% to 4%. Chairman PTEA explained that any limit less than 4.5% is not feasible for value added textile sector. They requested to review the issue and increase the upper limit as 4.5%.
