ISLAMABAD (July 23 2005): The Central Board of Revenue (CBR) has conveyed to the exporters that the policy of 'First in First out' (Fifo) will be adopted for sanctioning of refund of sales tax paid on stocks under SRO 538(I)/2005.
Official sources told this correspondent that Fifo phenomenon means priority will be given to a refund claimant who filed the claim first.
In this regard, the CBR has issued a directive to the collectors of sales tax on Friday. According to the instructions, in order to streamline the sanction of refund of sales tax paid on stocks under SRO 538(I)/2005 and for adopting a uniform calculation method for the same, it is clarified that methodology of Fifo shall be adopted for adjusting the stocks on which refund has already been paid by taking into account subsequent exports.
For instance, if the refund was paid on stocks in the month of March-05, the same is to be adjusted first against exports in April-05 and in case there remains any balance, the same will be adjusted against exports made in the subsequent months.
In cases where the refund on stocks is fully accounted for against subsequent exports, fresh claim should be sanctioned, if admissible, against subsequent tax paid purchases as per prevalent law.
It should also be noted that vide SRO 415(I)/2005, the refund of input tax was restricted to the extent of input which was utilised in the zero-rated goods. Now, the major chunk of exports is expected to be out of the stocks, which were available with the exporters prior to 12.05.2005.
In order to pre-empt any double refund on stocks, the refund was required to be sanctioned, only after adjusting the refund that has already been paid on the stocks available before May 12, 2005 in accordance with the Fifo methodology, the instructions added.