KARACHI, Jan 27: Millions of rupees of exporters are stuck with the Central Board of Revenue (CBR) on account of Sales Tax refund belonging to the period prior to zero rating of five major export industries from the current fiscal year.

The government, in budget 2005-06, had declared five major export industries as zero rated and abolished sales tax which was being collected at the rate of 15 per cent and later refunded. However, this resulted in generation of huge fake invoices commonly known as ‘flying invoices’ by some unscrupulous exporters claiming large amounts of refund.

Consequently, payments of sales tax refund to the genuine exporters, belonging to a period around May last year, were stopped and the CBR asked the exporters to consume their stocks by September 30, 2005, to allow the new system with zero rate sales tax to begin.

However, exporters have been arguing that they mostly keep stocks for a period of at least six months and that the deadline of September 30, 2005 was not only unrealistic but also not workable.

Exporters have been suggesting to the CBR to extend the last date for consuming stocks at least up to March 2006. As a result of this, payments of ST refunds are still held back by the CBR leading to a severe liquidity crunch in export trade.

Chairman Pakistan Bedwear Exporters Association (PBEA) Shabir Ahmed told Dawn on Friday that he held several meetings with the CBR on this subject but so far no decision was taken. Due to this stalemate, he said, exporters are faced with acute liquidity problem and their export commitments are being affected.

During several meetings, the CBR authorities pledged to extend the last date for consumption of exhausting stocks to Nov 15, 2005, but it was not officially announced so far, he added.

“How you expect exporters to exhaust their stocks in few days, which they normally keep for six to one year period to meet frequent orders placed by foreign buyers based on different seasonal demand,” he lamented. Without consuming the closing stocks, he said, the CBR was not ready to give us our huge money stuck up in ST refund.

Another funny development, Shabri pointed out, has recently taken place that the Member Sales Tax, CBR informed the exporters that the prime minister had given the consent for transferring powers refund payment to the textile ministry headed by Mushtaq Cheema.

But, the question is that the exporters have paid Sales Tax to the CBR and not to the textile ministry, and under what law the minister will arrange revenue payment to the exporters. Even then, he said, we approached the minister but he asked us to go to the CBR.

In case some unscrupulous elements or exporters have minted huge money by filing ‘fake and flying invoices’ in collaboration with Sales Tax department, or even for that matter CBR, why the genuine exporters should be deprived of their hard-earned money in the form of refunds.

He further said that the exporters are already faced with a lot many problems and their products are becoming uncompetitive in the world market, owing to rising input cost and the non-payment of refund was further aggravating the situation.

Shabir Ahmed pointed out that for long exporters were telling the CBR that the ‘Star’ system of making sales tax refund was not workable and do not meet the entire conditions of sales tax, but no one was ready to accept or even listen to such argument.

However, he said that the chairman CBR has ultimately accepted this fact and is reported to have said that Star system has failed as it did not meet the CBR as well as the exporters demand of a smooth and fool-proof system of processing of refund claims. If the CBR has paid more than the refund, it has to pay, it was not the fault of the genuine exporters who are unnecessarily being penalized and made to suffer.

During a recent meeting of PM advisor on Finance, Dr Salman Shah, with APTMA members, leading textile exporters raised this point but the advisor could not satisfy them on the matter.