LAHORE, May 16: Exporters of value added textile products have proposed to the Central Board of Revenue (CBR) to launch an extensive audit of businessmen suspected to have filed fake claims for sales tax refund against their stocks of inputs, which they claim were imported/purchased before the government declared the entire textile industry zero rated in the budget on June 6, 2005.
The CBR has also been suggested to reimburse sales tax of those exporters whose refund claims are found to be in order to pull them out of the financial crunch.
The declaration of the textile exports as zero rated provided that the inputs acquired before the budgetary announcement (up to June 5, 2005) were entitled for sales tax refund even for local exporters/buyers. That opened a window of opportunity for some exporters/buyers who allegedly made large “paper transactions” in order to obtain refund for the month of May and first five days of June.
In view of this situation, the CBR authorities imposed certain restrictions disallowing refund on the local sales and allowing refund only against export shipments made up to Sept 30 on the stocks acquired before the cut-off date of June 5, 2005. These restrictions were imposed after the CBR received applications seeking refunds far higher in value than average.
The exporters describe these restrictions, placed through issuance of notifications as un-constitutional. Several of them have already challenged the CBR restrictions in the high court. They insist that the “genuine” exporters had been suffering at the hands of the CBR which had been denying them the refunds to the tune of millions of rupees on their input stocks acquired before the budgetary announcement.
Industry sources told Dawn on Tuesday that the Pakistan Hosiery Manufacturers Association (PHMA) leaders in a recent meeting of the Advisory Committee of the Ministry of Commerce had suggested to the CBR officials to use computer profiles of claimants of “excess” sales tax refund against purchases during the last two months – May and June – of the last financial year and make refund payments on the basis of their average purchase.
“The computer profiles of regular refund claimants are available with the CBR, which can be extremely helpful in suggesting the pattern of purchases of each claimant over a particular period of time. On the basis of the data available with the CBR, the average monthly purchases of each claimant can easily be worked out,” the sources said. “It will not only help the CBR detect false claims for refund, but also make it easy for it to repay those whose claims are found perfectly in order,” the sources added.
When approached, PHMA chairman Shahzad Azam Khan told this reporter that the exporters guilty of having claimed excessive taxable purchases during May and June last year could be identified immediately for a detailed, investigative and chain audit through an analysis of their computer profiles of regular refund claims.
He said he supported the idea that the refund of such claimants should only be allowed only after satisfactory audit of buyers and suppliers. Moreover, he said, those who had filed revised returns for claiming higher inputs should also be identified for the same treatment as the unscrupulous elements needed to be taken to task in any case.
“We have requested the CBR chairman to immediately release sales tax refund to the exporters who had applied against their average purchases on their stocks,” he said.
The CBR chairman is said to have appreciated the idea and the exporters whose refunds are stuck are expecting a positive development in the respect over the next few weeks.