Government amends sales tax refund rules to attract new exporters

ISLAMABAD (January 03 2003) : The government on Thursday announced three lucrative incentives to attract new commercial exporters, enhance scope of Gold and Silver categories and expedite payments of sales tax refund for expanding the export base.

The Central Board of Revenue (CBR) amended Sales Tax Refund Rules 2002 on Thursday through SRO-02(I)/2003 to implement the decisions.

Now, the commercial exporters, who have exported goods up to December 31, 2002, are entitled to claim sales tax refund under old Sales Tax Refund Rules, 2000 instead of filing claims through refund procedure of 2002.

The exporters showing performance of one year would qualify for allocation of Silver category.

The qualifying period of three years of export performance has been slashed to one year.

The definition of commercial exporter has been broadened so that maximum number of Pakistani companies should have the opportunity to avail the benefits extended to exporters.

Commercial exporters will now also include those who deposit sales tax on their purchases by filing returns on behalf of sales tax-registered suppliers and produce the same for claiming refunds.

According to the details issued by the CBR, the Finance Minister, in his budget speech for the year 2002-03, had announced that a committee headed by the Chairman Export Promotion Bureau (EPB) would be set up to frame new sales tax refund rules.

The committee after detailed deliberations prepared a notification which was issued as Sales Tax Refund Rules 2002 vide SRO-575(I)/2002.

The rules have gone a long way in mitigating the menace of obtaining fraudulent sales tax refunds on the basis of fake/flying invoices and have also addressed the delay in issuance of refunds.

A Sales Tax Refund Depository (STARR) has been established and now sales tax refunds are received through computer diskettes and processed by the computer.

Thus, discretionary powers of the sanctioning authorities have been substantially curtailed.

The Sales Tax Refund rules are continuously being reviewed by the committee, headed by the EPB Chairman, with a purpose to look into problems which may still be faced by genuine exporters.

The All Pakistan Cloth Exporters Association (APECA), Faisalabad, and other associations of commercial exporters suggested certain amendments in the Sales Tax Refund Rules.

In the light of their suggestions, the rules have been amended through SRO-2(I)/2003.

(i) The definition of commercial exporters will now also include such commercial exporters who deposit the amount of sales tax on their purchases by filing sales tax returns on behalf of sales tax registered suppliers and produce the same for claiming sales tax refunds. This has enlarged the scope of definition of commercial exporters, which previously meant only those registered persons who exclusively made zero-rated supplies of same state goods.

(ii) Similarly, the demand of commercial exporters that sales tax refund claims pertaining to export orders in the pipeline be sanctioned as per old sales tax refund rules has also been accepted. Now, all the commercial exports who have exported the goods up to December 31, 2002 as per old procedures of sales tax refunds would also be entitled to claim refunds on exports made up to December 31, 2002, provided they also produce the bank credit advice showing receipts of sale proceeds of exports made by them.

(iii) In the past, there was a uniform qualifying period of three years of export performance for allocation of Gold and Silver categories. In order to encourage the relatively new exporters, the qualifying period of export performance as exporters has now been reduced from three years to one year. This amendment will provide an incentive to the new exporters who have shown a good performance over a relatively short period of one year and will now be entitled to avail the benefits of silver category after expiry of the period of one year without waiting for completion of a period of three years after sales tax registration.

The text of the SRO, which amended Sales Tax Refund Rules 2002:

(1) “In exercise of the powers conferred by section 50 of the Sales Tax Act, 1990, read with the first and second provisos to Sub-section (1) and Sub-section (2) of Section 10 thereof, the Central Board of Revenue is pleased to make the following amendments in the Sales Tax Refund Rules 2002, namely:-

(2) In rule 2, in Sub-rule (1), Clause (c), after the word “goods” the words “or deposits the amount of sales tax on his purchases from sales tax registered persons by filing sales tax returns on behalf of the suppliers” shall be inserted.

(3) In rule 12, in Sub-rule (4), for the words and comma, “per annum, on average for last three years” the words “during the last 12 months” shall be substituted.

(4) In rule 14, in the end for the full stop, a colon shall be substituted and thereafter following proviso shall be added and shall be deemed always to have been so added, namely:-

“Provided that refund claims filed by commercial exporters for exports made till 31st December, 2002, shall also be sanctioned under the Sales Tax Refund Rules, 2000, after production of Bank Credit Advice (BCA) showing receipt of sales proceeds in foreign exchange from the country to which the goods have been exported”.

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