Sales tax refund can be described as if a registered person has overpaid sales tax because of error, he / she may request a refund of the overpaid amount from the relevant tax authorities within a year after the payment is made or after the decision or order causing the refund is announced from the end of the period for which a claim is made.
ZA-LLP experts are well acquainted with the rules, regulations, law and procedure of getting the refunds of excess paid amount of Sales Tax. The provision of Sec. 66 of the Sales Tax Act, 1990 deals with the refund issue, which restricts that it should be claimed within one year. No refund of tax claimed to have been paid or over paid through inadvertence, error or misconstruction or refund on account of input adjustment, not claimed within the relevant tax period, shall be allowed unless the claim is made within one year of the date of payment. There is another restriction where a registered person did not deduct input tax within the relevant tax period, the Commissioner may, after satisfying himself that input tax is due and admissible, allow the registered person to take such adjustment in the tax period as specified by the Commissioner.
Understanding the Sales Tax Refund in Pakistan
When a registered person has paid input tax on the taxable purchases which exceeds the output tax on account of zero-rated local supplies or export made during that tax period, the excess amount of input tax shall be refunded to the registered person with in forty-five days of refund claim.
Monthly sales tax return filed by the claimant shall be treated as a refund claim if all the necessary data along with supportive documents has been received. If the claimant fails to furnish the claim within sixty days of filling the return no refund shall be entertained.
Sales Tax Refund on Overpaid Amount
If a registered person has overpaid sales tax because of error, he/she may request a refund of the overpaid amount from the tax authorities within one year after the payment is made or after the decision or order causing the refund is announced from the end of the period for which a claim is made.
Persons Who Can Claim Sales Tax Refund
Refund can be claimed by the following registered persons:
Registered manufacturers and commercial exporters who works on zero rate supplies or part of supplies.
Registered persons claiming excess input amount which could not be consumed with in three months.
If an amount of sales tax paid by the registered person mistakenly.
Registered persons who purchase tax paid inputs for use in manufacturing of zero-rated goods.
And if an amount is paid on the demand of the department, but later the demand is set aside by the competent authority.
The concerned institute for refund is Regional Tax Office (RTO), or Large Taxpayer Unit (LTU) as the case may be. Registered persons now can also claim sales tax refund through the FASTER SYSTEM.
As a Centralized System for online payment of Sales Tax/FED refunds have been devised, so the taxpayers are requested to update their IRIS profile. Taxpayers are advised to do needful ASAP to avail electronic transfer facility.
For getting refund of Sales Tax paid in excess, a Taxpayer (RP) should be aware of the provisions of Sales Tax Laws, Rules and Procedures, SROs, Rulings and Instructions as explained below:
Sec. 10 of the Sales Tax Act, 1990
Sec. 66 of the Sales Tax Act, 1990
Sec. 67 of the Sales Tax Act, 1990
Chapter V (Refund) of the Sales Tax Rules, 2006 (notified vide SRO 555(I)/2006 dated 05-06-2006)
SROs, STGS, Circulars, Rulings and Clarifications
Scope of Sales Tax Refund
In case where the refund has become due on account of any decision or judgement of any officer of Inland Revenue or Court or the Tribunal, the period of one year shall be reckoned from the date of judgement or decision. The application of claim filed under Sec. 66 shall be disposed of within the period not exceeding 90 days from the date of filling of such application of claim. The provision of Sec. 67 deals with a Delayed Refund. Where a refund due under Sec. 10 is not made within the time specified in this behalf, there shall be paid to the claimant, in addition to the amount of the refund due to him, further some equal to KIBOR per annum of the amount of refund due, from the date following the expiry of the time specified as aforesaid to the day preceding the day of payment of refund. The refund of sales tax is also payable through sales tax bonds under Sec. 67-A which are being issued by FBR Refund Settlement Company Limited which is licensed by the SECP. These bonds are issued under the Securities Act, 2015 in lieu of payment of refund amount. These bonds have the maturity period of three years and bear simple profit of 10%. There shall be no compulsory deduction of Zakat against the bonds.
The main issue relating to refund is about the refund of input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account of zero rated local supplies or export supplies or export made during that tax period, the excess amount of input tax shall be refunded to the registered person not later than 45 days of filling of refund claim. The excess input tax against supplies other than zero rated or export, such excess input tax maybe carried forward to the next tax period, along with input tax as is not adjustable of sub-sec. (1) of S. 8B. Sec. 62 of the Sales Tax Act allows drawback on re-export, when any goods which have been imported into Pakistan and on which tax has been paid on importation, are reexported outside Pakistan and such things are capable of being identified seven- eight of such tax shall, except as otherwise provided, be paid as drawback, and the provisions of Customs Act, 1969 relating to drawback of customs duties shall, so far as may be applied to such tax, as they apply for the purposes of that Act. The re-export should be made within 2 years from the date of import. FBR can extend the period for one year. FBR is also empowered to change the terms and conditions for the drawback on goods taken into use between importation and re-exportation under Sec. 63 l 64 of the Sales Tax Act. The claim should be made within one year.
Rule 11 of the Export Oriented Units and Small and Medium Enterprises Rules, 2008 allows remission of Customs Duty, Sales Tax, Federal Excise Duty and Income Tax to a licencee of an Export Oriented Unit, if the input or output goods are damaged or destroyed or rendered unfit for consumption or sale. Rules 7 and 8 of the Duty & Tax Remission for Export Rules, 2001 also allow the remission of duties and taxes, if the goods are destroyed or damaged and become unfit for consumption or sale.
Chapter V of Sales Tax Rules, 2006 deals with the procedure of payment of Refund. Rule 26 deals with Application, R. 26A is for Expeditious processing and payment of refunds, R. 28 is for filing of Refund claim, R. 29 is for Scrutiny and processing of refund claim, R. 30 is for Sanction and Payment of refund Claim, R. 34 is for Refund of excess input tax and relating to zero rated supplies, R. 38 is relating to Supportive documents and R. 39A deals with the processing of refund claims of Large Taxpayers Units. Chapter IX of The Sales Tax Special Procedures Rules, 2007 give the special procedure for processing of Refund of claims filed by the persons engaged in making zero rated supply of Ginned Cotton.
Under the provision of Sec. 61A of the Sales Tax Act, the Board may authorize the repayment in whole or in part of the input tax paid on any goods acquired or imported into Pakistan by the persons registered in AJK as are engaged in making of zero-rated supplies. The Payment of Sales Tax to Persons Registered in AJK Rules, 2008 deals with such situations. The Forms relating to the re-payment claim from Govt. of Pakistan under Sec. 61A of the Sales Tax Act and Sales Tax repayment order, are given in said Rules. Procedure for processing of refund claims of recognized Agricultural Tractor Manufacturers are given in the Refund Claims of Recognized Agricultural Tractor Manufacturers Rules, 2012. The Special Procedure for Adjustment of Sales Tax Due on Fertilizers Rules, 2015 contain the procedure of processing for adjustment of sales tax due on fertilizers.
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