The textile exporters have decided to take final step against the government failure in resolving issue of Sales Tax charges on certain goods/services under provincial laws and FBR Sales Tax laws, it is learnt.
Textile exports sector sources told Pakistan Today that the issue of conflict of federation and provinces on Sales Tax was discussed during several rounds between Pakistan Textile Exporters Association (PTEA) and FBR officials and Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan.
They said that controversy was yet to be resolved between federation and the provinces and the exporters had been upset 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.
They said that the industry had submitted that the issue of applicability of Sales Tax charges on certain goods/services has cropped up since promulgation of Provincial Services Acts 2011, 2012, 2014 and 2015.
They pointed out that was decided during previous meetings 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. But no committee has yet been constituted till date, association said.
FBR officials on the other hand, informed that on this specific issue, dialogues with provincial government were under way and the matter would be resolved later.
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 has been 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 3.5pc was assigned to the system prior to Finance Act, 2015.
During the previous meetings, it was decided that the same will be enhanced to 4.5pc due to rise in the sales tax rate from 2 pc to 3 pc 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 and exporters 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 pc 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 pc to 4 pc. The PETA chairman explained that any limit less than 4.5pc was not feasible for value added textile sector. They requested to review the issue and increase the upper limit as 4.5 per cent.
