Karachi – The Pakistan Business Council (PBC), a leading voice for businesses in the nation, is raising serious concerns over the Federal Board of Revenue’s (FBR) policy on sales tax refunds, warning of potentially crippling consequences for Pakistan’s export sector. The PBC has specifically voiced its alarm regarding the capping of sales tax refunds for exporters operating outside the erstwhile zero-rated sectors, a move they argue is detrimental to fair trade and export competitiveness.
In a letter addressed to Dr. Najeeb Ahmed, Member (Inland Revenue Policy) at the FBR, the PBC detailed their growing frustration. While acknowledging and appreciating the FBR’s earlier step of extending FASTER-based sales tax refund processing to all exporters through SRO 1507(1)12024, the Council emphasized that the current refund policy falls drastically short of creating a level playing field.
The core of the PBC’s grievance lies in the disparity in refund limits. Initially, the FBR capped sales tax refunds at 5% of export proceeds for exporters outside the previously zero-rated sectors, while maintaining a 12% limit for those within. The PBC had promptly appealed for an alignment, requesting the FBR to revise the policy and extend the 12% limit to all exporters, ensuring equitable treatment across the board.
However, instead of addressing these concerns, the FBR has taken a step in the opposite direction. According to the PBC’s letter, the refund processing limit for exporters outside the erstwhile zero-rated sectors is set to be further reduced to a mere 3% starting January 2025.
This drastic reduction has been met with strong disapproval by the PBC. In their letter, they argue that this change will “exacerbate the difficulties faced by exporters,” leading to a cascade of negative consequences. These include:
- Increased Delays: Exporters will face longer waits to access their rightful refunds, tying up crucial capital.
- Working Capital Constraints: Reduced and delayed refunds will strain exporters’ working capital, hindering their ability to operate efficiently and invest in growth.
- Administrative Burdens: Processing refunds manually beyond the drastically reduced limit will add significant administrative burdens, diverting resources and time away from core business activities.
The PBC argues that this policy effectively penalizes a significant segment of the export sector and undermines the very purpose of facilitating trade. They reiterate their earnest appeal to the FBR to “reconsider the existing restrictions and restore parity.” The Council urges the FBR to demonstrate its commitment to a level playing field by increasing the FASTER-based refund processing limit to 12% for all exporters, mirroring the facility currently enjoyed by the erstwhile zero-rated sectors.
The PBC’s strongly worded letter underscores the growing unease within the export community. Industry stakeholders are now keenly watching to see if the FBR will heed the call and take corrective measures to alleviate the mounting pressure on Pakistan’s vital export sector. Failure to address these concerns, the PBC implies, could have serious repercussions for the nation’s export performance and overall economic stability.
