Rs 100 billion ST refunds blocked by FBR

The Federal Board of Revenue (FBR) has blocked Rs 100 billion sales tax refunds and rolled back Refund Payment Order (RPOs) claims by the textile sector filed from tax period July 1, 2016 onwards. Due to paucity of funds, Prime Minister”s Export Incentive Package is not being implemented, particularly payment of sales tax refunds during the current fiscal year, informed industry sources revealed to Business Recorder.

The package requires release of Rs 7 billion per month to exporters under different incentives, they added. FBR sources maintain that RPOs would be eventually reprocessed and verified under the new exercise being carried out by the field formations, but the textile industry termed it ”a technique to delay all sales tax refunds payments in 2016-17”.

When contacted, sources in Ministry of Textile said that a total of Rs 2.6 billion has so far been released on account of duty drawbacks on local taxes in the current fiscal year. Out of this amount, Finance Ministry had released Rs 1 billion to the State Bank of Pakistan (SBP) for duty drawbacks on local taxes collected from garments, home textiles, processed fabric, greige fabric and yarn manufacturing cum-exporters units under the Prime Minister”s Export Incentive Package.

Breakup of drawbacks on local taxes revealed Rs 1 billion was released for claims pertaining to 2015-16 and Rs 0.6 billion for claims pertaining to duty drawbacks on local taxes for 2014-15, officials of textile ministry added. Gohar Ejaz, a leading textile exporter and former Chairman All Pakistan Textile Mills Association (APTMA), told Business Recorder here on Monday that the FBR is not releasing any refunds to textile exporters to overcome revenue shortfall of around Rs 150 billion during 2016-17. Resultantly, a serious liquidity crunch has been witnessed by textile units. When the textile sector started pressurising the FBR to issue genuine and admissible refund claims, the FBR has reportedly issued instructions to field formations to rollback all RPOs issued to five export-oriented sectors.

Chairman Pakistan Apparel Forum Muhammad Jawed Bilwani stated that besides sales tax refunds the FBR is also not paying customs rebate or duty drawback pending with the Model Customs Collectorate (MCCs). He said the FBR has directed field formations that the electronic system has generated these RPOs to the textile, leather, carpets, surgical and sports goods which would be verified based on parameters communicated to the field formations. Such instructions account for the blockade of claims in the last quarter (April-June) 2016-17, Bilwani added.

The incentives were notified on January 23 for textile sector, but the duty drawbacks were allowed for export goods declarations (GDs) filed on or after January 16, 2017 to June 30, 2017. Textile exporters have submitted verified DLTL claims of Rs 490 million as of March 30, 2017 and a summary of Rs 500 million was submitted to the Finance Ministry. The Finance Ministry released Rs 1 billion to the SBP against the claims submitted by exporters. Under the PM”s package, drawback would be available to garments at 7 percent, made-ups at 6 percent and processed fabrics at 5 percent. For the very first time, these incentives were extended to yarn and greige fabric at 4 percent.