The FBR instructions issued to the LTUs/RTOs said that the parameters for scrutiny of sales tax refund claims for tax period of 2016-17 are: the refund claim is commensurate with exports; refund claimed on packing materials is disallowed; declaration of purchases and sales, and description of goods, etc, as in the return match with the details in RCPs/refund claim data and input tax claimed is in accordance with the details in provisions of sections 7 and 8 of the Sales Tax Act, 1990.
According to the FBR instructions issued to the field formations, the RPOs generated for the year 2016-17 having high refund to export ratio have been rolled back and referred to respective LTUs/ RTOs for proper scrutiny and processing. An official said that all RPOs are not been subjected to scrutiny except claims involving high amount of refunds.
The FBR said that through the budgetary measures for the year 2016-17, SRO No 1125(1)/2011, dated 31.12.2011, was amended by SRO No 491(1)/2016, dated 30.06.2016, providing for zero-rating of inputs of five export-oriented sectors and also barring input tax adjustment on packing materials. It was anticipated as well as assured by the industry that as result of this measure, sales tax refund claims would decline substantially. However, an examination of returns filed by these sectors has revealed that the sales tax refund has remained at the same level.
Accordingly, in order to safeguard the revenue and forestall the possibility of wrongful refunds, the RPOs generated for the year 2016-17 having high refund to export ratio have been rolled back and referred to respective LTUs/ RTOs for proper scrutiny and processing through the computerised system STARR, the FBR said.
All LTUs/ RTOs are advised that refund processing offices should ensure that the refund claim is commensurate with exports; refund claimed on packing materials is disallowed; declaration of purchases and sales and description of goods, etc, as in the return match with the details in RCPs/refund claim data; and input tax claimed is in accordance with the details in provisions of sections 7 and 8 of the Sales Tax Act, 1990.
In case of dubious refunds, the provisions of section 10(3) regarding investigation/audit may also be invoked. The RPOs may be generated after such scrutiny for the amount found admissible.
The exercise may be completed by 30th April, 2017 and a report of findings may be communicated to the board, the FBR added. An expert said that the FBR has directed the field formations to invoke provisions of section 10(3) of the Sales Tax Act in case of dubious refunds. Under section 10(3), where there is reason to believe that a person has claimed input tax credit or refund which is not admissible to him, the proceedings against him shall be completed within 60 days. For the purposes of enquiry or audit or investigation regarding admissibility of the refund claim, the period of sixty days may be extended up to one hundred and twenty days by an officer not below the rank of an additional commissioner inland revenue and the board may, for reasons to be recorded in writing, extend the aforesaid period which shall in no case exceed nine months.
Copyright Business Recorder, 2017