LAHORE – Industry in Khyber Pakhtunkhwa (KP) is facing enormous problems to the apparently apathetic attitude of the Federal Bureau of Revenue (FBR), with billions of rupees in sales tax refunds not granted are giving headaches to industrialists.
Industrialists told Pakistan Today that Prime Minister Yousaf Raza Gilani during his visit to Peshawar, besides indicating other incentives, exempted 50 percent of sales tax on supplies to compensate for losses suffered by commerce and industry because of the war on terror in Khyber Pakhtunkhwa.
They also indicated that KP remains an industrially backward province because of the Federal Board of Revenue (FBR) policy, dubbing its present stonewalling tactics on the sales tax refund, yet another attempt to create tension between the federating units of Pakistan. It was stressed that the sales tax reduction of 50 percent does not compensate for any loss, with the increase or decrease in the sales tax having no bearing on the profit and loss of the company.
Instead of a 100 percent sales tax invoice, the reduced 50 percent sales tax invoice is passed directly onto the customers. Therefore, they reasoned that the deliberate withholding of sales tax refunds is unreasonable, unjust and discriminatory.
Iskander Muhammad Khan, an industrialist based in Gadoon Amazai Industrial Estate, KP said that his company Syntron Limited has been victimised by the deliberate delay of sales tax refund through the non-application of Rule 34(1)B of Sales Tax Refund Order 2006 that pertains to the plastic section which entails a refund period of three months.
Instead, Rule 34(1)D that relates to the non-plastic sector has been applied with a refund period of 12 months. “This besides being malicious, is an attempt to circumvent the PM’s directives,” Khan revealed that as a result of the failure to refund sales tax of Rs 45.77 million that was due after three months, namely November 2010; his company has incurred interest costs of Rs 3.77 million over and above normal business expenditure.
He said this situation was mirrored across the province and that losses incurred by other industries ran into billions of rupees. “Beside the increased cost of interest, deliberate withholding of sales tax refund has exhausted our working capital limits and we are facing difficulties in maintaining industrial operations,” Khan said. He complained that all communication in this regard with the FBR has been poor with calls often going unattended.
The seemingly deliberate delay in the refund of sales tax gives an impression that the FBR is working against industry in the province. He also asserted that earlier, when the government had granted the sales tax exemption at the finished goods stage to KP industry, the FBR went out of its way to manipulate the exemption by reducing sales tax on the finished goods to 10 percent with the balance of five percent being imposed as excise duty.
Due to this fact, industry across KP has continued to suffer, seriously jeopardising the process of industrialisation in KP, another industrialist added.
