Sales Tax Instructions

Sales Tax Instructions, 2009
II. (a) Sales Tax Refund.—Exporters were being allowed refund against 100% Export
Production. Later this facility was restrained to the extent of amount of sales tax on
goods actually exported.
Refund of sales tax paid on the raw materials (input tax) used in the manufacture of
goods meant for export actually becomes due only when goods are physically exported.
In order to facilitate the exporters (particularly commercial exporters), refund of input
tax was allowed in the beginning of VAT-mode of sales tax during July, 1996 on the
goods which were lying in stock and not actually exported. However, cases of abuse of
this facility were detected wherein the stock had been sold in the local market and the
amount of refund obtained from the sales tax Department was actually used for business
purposes. This led to the withdrawal of the facility and imposing of restrictions of
allowed refund to the extent of goods actually exported. On the pressure of the business
community, the then Government allowed the facility temporarily which is still continuing
in the form of administrative instructions, although, the refund rules did not permit it.
This is leading to audit objections. Actually, the administrative instructions which are at
variance with the notified rules need to be withdrawn.
II. (b) Delay in Verification of Raw Material Invoices.—Faisalabad Collectorate has
sent raw material purchase invoices of exporters for verification to Lahore and Karachi.
Nearly 30,000 invoices are pending verification. Till the verification of these invoices no
refund is issued to exporters. Huge amounts of exporters are stuck up in sales tax and
they are unable to execute more export.
It is suggested that other Collectorates may be asked to expedite verification:
i) No policy issue is involved and rather it is a routine matter due to which the
number of tax invoices needing verification keeps on fluctuating .
ii) The issue is restricted mainly to the commercial exporters and manufacturerscum-exporters
normally are not affected.
iii) Commercial exporters purchase goods/materials from various suppliers spread
throughout the country and then export their products. For the purpose of
claiming refund of the tax paid on the so purchased goods/materials, they
enclose scores of invoices issued by the suppliers of such goods/materials. The
conterned sales tax Collectorate has to undertake a hereculian job of
undertaking verification of the genuineness or otherwise of those invoices
because of rampant practice of issuing flying/sham invoices for claiming refund
of sales tax which has never been paid. On account of physical verification of
those invoices from the suppliers who issued those and who are located in farflung
places does take sometime and at times delay also is caused because of the
aforesaid factors alongwith the non-availability of the suppliers at the given
addresses. Despite these odds, CBR requires the respective Collectors to
expedite the verification so that the genuine refund claims do not get delayed.
This is proved from the fact that during the period July, 99 to Jan, 2000 an
amount of Rs.12.3 billion has been sanctioned as refund as against Rs.9.8
billion sanctioned during first seven months of the last financial year. Although
the country‘s exports have not increased substantially during first seven months
of the current financial year as compared to the corresponding period but the
increase in refund in the current financial year is 25.6% as compared to the
corresponding period. However, the concerned Collectors have been advised to
get all the pending invoices verified without any delay.