Sales Tax General Order: Refund to Manufacturers of Five Export Oriented Sectors

After abolition of zero-rated tax regime under SRO 1125(l)12011 dated 31.12.2011, purchases (whether through imports or domestic supplies) in textile sector were subjected to sales tax @ 17%o and the inputs consumed in expo(ed goods, thus, became liable to be refunded to the exporters. In order to facilitate the cash flow requirements of export-oriented sectors particularly textile exporters, an automated Sales Tax e-Refund System (FASTER) was introduced to process and sanction exporters’ refunds expeditiously. However, it continued to malfunction on multiple counts producing suboptimal outcomes and was found deficient in effectively analyzing the admissibility of refund in relation to quantity and quality of inputs claimed by the taxpayers, resulting in allowing portion of refund relating to such inputs which otherwise were not liable to be allowed either on the basis of excess consumption or otherwise being inadmissible under the law. These system glitches created problems for exporters in terms of uncertainty and stuck-up liquidity, and for the tax administration in terms of credibility deficit.



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