ISLAMABAD (July 25 2005): The Central Board of Revenue (CBR) has decided to issue sales tax refund to textile sector units only after verification of sales tax invoices to ensure authenticity of the fresh claims pertaining to tax period June, 2005.
The CBR has issued instructions to all collectors of sales tax that refund claims filed by the textile sector, after being zero-rated, have increased alarmingly. Tax officials observed that refund should be allowed only after proper verification. In this regard, the CBR has directed the regional collectors that no refund of sales tax should be made without cross-matching of invoices.
When this correspondent asked the tax officials to give reasons for increase in refund claims after zero-rating of sales tax for the textile sector, they said that refund claims filed by the textile sector pertaining to tax period ending on June 30, 2005 has shown extraordinary increase. It is apprehended that a large number of fake/flying invoices might have been used to obtain refunds.
Quoting an example to explain the phenomenon, officials said that if refund against purchases is filed amounting to Rs 5 billion in one month, now the claims are about Rs 6-7 billion, reflecting a huge difference.
The CBR is examining the aspect of fake refunds on the basis of fraudulent invoices. It is yet to be seen how suddenly the refund claims have shown extraordinary increase for the last month of the fiscal year ie June 2005.
“One thing is sure from the data that refund claims amount is much higher than the actual refund to be claimed”, officials said.
According to a leading tax consultant, CBR has the authority to undertake special sales tax audit under section 32-A of Sales Tax Act, 1990, to confirm the authenticity and eligibility of these refunds. It is apprehended that exorbitant amount of refunds (frivolous/fake) may be lodged by certain delinquent exporters.