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CBR likely to amend Sales Tax refund rules

ISLAMABAD, March 12: The Central Board of Revenue (CBR) is likely to further amend the sales tax refund rules to facilitate the taxpayers.

An official source told Dawn on Wednesday that to change the refund verification process further low risk, refund claimants will be added to the gold category so that at least 50 per cent of the total amount refunded was in respect to gold claimants.

Under the proposed amendments, the official said the tax authorities would review the reporting pattern of each gold claimant to identify a range within which refunds to that claimant might be expected and pay each refund from gold claimants within their identified range without submission of examination of supporting documents.

This would result in benefits to the gold/silver scheme for claimants as well as for the CBR, said the official.

To provide facilities to the exporters, the official said, it was recommended to withdraw the requirement to verify each invoice supporting refund claims. It would be replaced with a policy of verifying those invoices involving more than Rs200,000 plus a small sample (no more than 5 per cent) of the remaining invoices, said the official.

According to the official, the invoice authenticating capacity of Sales Tax Automated Refund Repository (STARR) system – an automated refund system, might be more effectively used to check invoices of regular taxpayers.

It was also recommended to identify taxpayers, other than refund claimants, with unusually high ratio of input credit to output tax and instruct them to submit, in electronic format and hard copy, the purchase invoices and entry bills to support input credits claimed in that particular period.

According to the official, the tax authorities would process the purchase invoices and entry bills in STARR and extract a sample of the purchase invoice to be verified at source.

The IMF has recommended to the CBR to allow the new STARR system to operate without modification for at least three months to identify adjustments needed in the next release and to permit development of those elements of the STARR system that were to deal with identifying claimants for gold treatment and selection of claims from other categories for pre-audit.

DTRE rules: The CBR is likely to further amend the Duty and Tax Remission for Export (DTRE) rules to facilitate the exporters.

An official source said that proposals had been received from various stakeholders particularly from the textile exporters to remove the irritants from the DTRE rules.

According to the proposals sent to CBR seeking removal of irritants from the DTRE scheme to make it more user-friendly namely: procurement of PSF is not allowed under DTRE rules; provision of value addition services as well as stores, spares, packing materials all types, oil and lubricants, dyes and chemicals, bleaching, dying, processing and stitching services from outsource channels are not covered under DTRE rules; duty and tax remission on locally procurement of imported inputs is not allowed.

They also asked to induce and attract domestic suppliers to provide input goods to manufacturers-cum-exporters under DTRE rules, supplies so made should be treated as to have been made under the standard purchase order (SPO) and all benefits under section 50 (5AA) of Income Tax Ordinance 1979 and Sales Tax Act 1990 be provided to such domestic suppliers, special status be given to indirect exporters, who after supply of input goods to DTRE holders come under the refund regime of the sales tax act, 1990.

It was further demanded that utilization period under rule 298 was required to be enhanced; time period for maintenance of records should be three years against current five years under the DTRE rules and all customs collectorate be directed to expedite processing of DTRE applications.

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