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GOVERNMENT OF PAKISTAN
CENTRAL BOARD OF REVENUE
Islamabad, the 20th June, 2000
NOTIFICATION
(Sales Tax)

S.R.O. 417(I)/2000.-- In exercise of the powers conferred by section 50 of the Sales Tax Act, 1990, 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 rules, namely:--

1. Short title, application and commencement.-- (1) These rules may be called Sales Tax Refund Rules, 2000.

(2) These shall apply to--
(i) registered manufacturer-cum-exporters and commercial exporters who desire to zero rate all, or part, of their supplies under section 4 of the Sales Tax Act, 1990;

(ii) registered persons who claim refund of such excess amount of input tax as is not fully adjusted against the tax payable during a period of one year following the tax period in which the credit first arose;

(iii) investors claiming refund under the second proviso to sub-section (1) of section 10 of the Sale Tax Act, 1990; and

(iv) registered persons claiming refund of tax under section 66 of the Sales Tax Act, 1990.

(3) These shall come into force at once.

2. Definitions.-- (1) In these Rules, unless the subject or context otherwise requires.--

(i) "Act" means the Sales Tax Act, 1990;

(ii) "Claimant" means a registered person being a manufacturer-cum-exporter or a commercial exporter, who files a sales tax return claiming refund under these rules and includes an investor or any other registered person entitled to claim refund under the Act;

(iii) "Commercial Exporter" means a person who having no manufacturing facility of his own. opts for voluntary registration under section 18 of the Act for exclusively making zero-rated supplies of same state goods and claims refund of input tax thereon;

(iv) "Officer-in-charge" means deputy collector of sales tax or any officer of sales tax of senior rank who holds full or partial charge of the Refund Division;

(v) "Investor" means a person entitled to claim refund of sales tax on plant and machinery under second proviso to sub-section (1) of section 10 of the Act;

(vi) "same-state-goods" means goods produced by a registered manufacturer-cum-exporter for export or purchased by a commercial exporter against tax invoice for export as such and includes the goods which have been got manufactured or processed from one or more than one registered vendor against tax invoice against processing charges or as the case may be, manufacturing or conversion charges;

(vii) "supportive documents" means documents prescribed in rule 9 and includes whether on electronic media or otherwise, any such information, records, statements or declarations as may be considered necessary by the officer-in-charge to substantiate the genuineness and admissibility of the refund claim; and

(viii) "Processing Officer" means auditor or deputy superintendent deputed by the officer-in-charge to process and scrutinize a refund claim.

(2) All other expressions used but not defined in these rules shall have the same meanings as are assigned to them in the Act.

3. Establishment of refund division.-- (1) There shall be established a Refund Division in each Collectorate of Sales Tax to receive, process and settle the refund claims filed under the Act.

(2) A deputy collector or such senior officer as may be nominated by the Collector of Sales Tax, shall be head of the Refund Division:

Provided that Collector of Sales Tax may distribute work of the Refund Division amongst more than one deputy collectors in such manner as he may deem fit.

4. Filing of refund claim.-- (1) Monthly sales tax return filed by a claimant shall be treated as refund claim once all the supportive documents have been received to the satisfaction of the officer-in-charge and shall be processed accordingly.

(2) The claimant shall forward to the officer-in-charge a legible photocopy of the bank-receipted return, referred to in sub-rule (1), duly accompanied by the requisite supportive documents for processing and settling the refund claim;

Provided that in case of a refund claim where such supportive documents have not been so received, the officer-in-charge may require the claimant through telephone, facsimile or in writing to furnish the same within such time as may be specified by him.

5. Scrutiny of refund claim.-- (1) On receipt of a refund claim the processing officer shall carry out necessary examination and scrutiny in order to ascertain the bona fides or otherwise of the refund claim under the law. He shall check the accuracy of declarations and calculations, etc., on the sales tax return involving the amount of refund claimed and satisfy himself that the amount so claimed as refund is properly supported by the documents as prescribed under these rules to prove the genuineness and admissibility of the refundable amount.

(2) After having satisfied himself about the genuineness and admissibility of the refund claim, the processing officer shall submit a written comprehensive refund examination report within seven days of receipt of the supportive documents, to the concerned senior auditor or superintendent who shall give his conclusive recommendations thereon and pass it on to the officer-in-charge within three days of receipt of the case from the processing officer. The officer-in-charge shall satisfy himself about the genuineness and admissibility of the claim on the basis of said report, recommendations and supportive documents.

(3) Where the officer-in-charge is of opinion that any further inquiry or audit is required to establish the genuineness and admissibility of the claim or otherwise he may make or cause to be made such inquiry or audit:

Provided that such inquiry or audit shall be got conducted through an officer not below the rank of senior auditor or superintendent through the concerned officer-in-charge of the Audit Division:

Provided further that an officer assigned to conduct inquiry or audit of the refund claim may examine such business records and commercial documents of the claimant or of any person concerned with the refund claim in any manner as he may deem necessary to satisfy himself about the genuineness and admissibility of the claim.

6. Sanction and payment of refund claim.-- (1) If on the basis of supportive documents, refund examination report, recommendations, inquiry or audit report as the case may be the officer-in-charge is fully satisfied about the genuineness and admissibility of the claim, he shall, subject to the provisions of rule 7 sanction the claim and send the original copy of the sanction order to the treasury officer for issuance of cheque to the claimant:

Provided that if the claimant is liable to pay any duty or tax, additional duty or additional tax or penalty under any law administered by the Board, payment of the refundable amount shall be made only after adjustment of unpaid outstanding amount of duty or tax or as the case may be, additional duty or additional tax and penalty.

(2) The treasury officer, before issuing cheque to the claimant, shall personally ensure that cheque of only such amount is issued to the claimant as is specified and sanctioned in the sanction under:

Provided that refund cheque shall be issued to the claimant only through courier service, or through urgent mail service, with due acknowledgement:

Provided further that the treasury officer shall maintain all the records and registers, etc; prescribed under the treasury or financial laws for the purpose of keeping account of payment of Federal revenue refunds.

(3) The duplicate copy of the sanction order shall be retained in the Refund Division in relevant file.

7. Extent of payment of refund claim.-- (1) Refund to a commercial exporter shall be sanctioned and paid only to the extent of input tax involved in the goods actually exported and within one month of the submission of supportive documents.

(2) In case of manufacturer-cum-exporter, refund on zero-rated supplies shall be sanctioned and paid within one month of furnishing of the supportive documents, and refund, if any, no domestic supplies shall be sanctioned and paid in the following manner namely:--

(i) Fifty per cent of such claim shall be sanctioned and paid within one month of filing of supportive documents:

(ii) The remaining fifty per cent shall be sanctioned and paid after
(a) verification of deposit of tax paid on goods in respect of which refund of input tax has been claimed; and
(b) audit of the records and accounts and verification of stocks of the claimant.

Provided that in case action under clause (ii)/above is not completed within ninety days of the receipt of supportive documents, the remaining fifty per cent refund shall be paid if otherwise admissible on the basis of supportive documents and action under the said clause shall be completed thereafter:

Provided further that manufacturer-cum-exporters who zero-rate their supplies and also make domestic supplies duly reflected in their monthly return, may, ipso facto, deduct the amount of tax payable on their domestic supplies from the amount of refund due on their zero-rated supplies and claim refund only for the balance amount, if any;

Provided also that refund to the manufacturer-cum-exporters who zero-rate or intend to zero-rate hundred per cent of their supplies shall be sanctioned and paid in such manner that they will get within thirty days of filing of the supportive documents all the refund on goods already exported at the time of claiming refunds and fifty per cent on goods yet to be exported and balance after all the remaining goods have been actually exported and after verification of deposit of input tax and audit of records and accounts and verification of stocks as aforesaid.

(3) In order to calculate the refund components of zero-rating and local supplies, the following formula shall be applied in case of manufacturer-cum-exporters, namely:--

ILLUSTRATION:

the zero rated components is = ExR = 600x100 = Rs. 60/-

D+E 400+600

and

local supplies component is = DxR = 400x100 = Rs. 40/-

D+E 600+400

(4) The time limit given in this rule shall not apply to cases subjected to further inquiry or audit under sub-rule (3) of rule 5:

Provided that the officer-in-charge shall inform the claimant about the subjection of his refund claim to inquiry or audit as the case may be.

(5) The refund claims of registered manufacturers, importers, wholesalers or retailers shall be sanctioned and paid in the manner prescribed in clause (i) and clause (ii) of sub-rule (2) read with the first proviso to sub-section (1) of section 10 of the Act.

8. Action on inadmissible refunds.-- (1) In case any refund claim or part thereof is found not genuine and not admissible under the law, a notice shall be served on the claimant requiring him to show cause in writing, within fourteen days, as to why the claim or as the case may be, part thereof should not be rejected and as to why the claimant should not be proceeded against under the relevant provisions of law.

Provided that in cases where the amount of refund liable to rejection does not exceed five million rupees, the officer-in-charge shall bring to the knowledge of additional Collector having jurisdiction in writing on the relevant file the reasons for issuing the notice.

Provided further that the cases involving amounts of refund liable to rejection exceeding five million rupee shall be brought to the knowledge of the Collector before issuance of notice.

(2). After affording a reasonable opportunity of hearing to the claimant, the officer-in-charge shall issue the show cause notice to such claimant and pass an adjudication order specifying reasons therein:

Provided that in case the claimant does not respond to the show cause notice or does not appear himself, or through his authorized representative, to defend his position on three dates of hearing, the officer-in-charge may decide the case ex part on the basis of facts and evidence available on record.

9. Supportive documents.-- (1) A manufacturer-cum-exporter or a commercial exporter shall submit the following documents in support of his refund claims, namely:--

(i) Input tax invoices and/or as the case may be, bills of entry.

(ii) Zero-rated invoices in case of export.

(iii) Output tax invoices in case of domestic supplies;

(iv) tax invoices of intermediary processes as and if applicable.

(v) bill of exports (quadruplicate copy) indicating Mate Receipt number and date or as the case may be, Airway bill number or railway receipt number and date or postal receipt number and date.

(vi) bill of lading, and airway bill or as the case may be, railway receipt and postal receipt indicating transportation of goods out of Pakistan; and

(vii) inventory statement indicating in terms of value and unit of quantity, stocks of inputs and outputs carried over from the previous tax period, additions in such stocks, stocks consumed or supplied during such period and stocks in balance.

(2) An investor shall furnish the following documents,. namely:--

(i) Bills of entry or tax invoices indicating import or purchase of plant and machinery, its components and spare-parts;

(ii) plot allotment order or ownership documents of the premises where such plant and machinery has been installed;

(iii) rent deeds in case the plant and machinery has been installed in the rented premises;

(iv) feasibility report of the industrial project and its budget forecast; and

(v) loan documents of the bank or non-banking financial institution as and if applicable.

(3) in case of refund claimed under section 66, the following documents shall be submitted, namely:--

(i) bill of entry or input tax invoices and tax invoices of intermediary processes (if applicable) as the case may be;

(ii) output tax invoices in case goods have been supplied domestically;

(iii) zero-rated invoices in case goods have been exported;

(iv) export documents mentioned in sub-rule (1); and

(v) inventory statement, if required by the officer-in-charge.

(4) The claimant shall submit the original supportive documents in original along with one set of photo copies and the original supportive documents shall be returned to the claimant after tallying with the photocopies by the officer-in-charge or any officer authorized by the Collector in this behalf, who will endorse his proper verification on each photocopy:

Provided that the original quadruplicate copy of the bill of export shall be returned to the claimant after recording the following endorsement under the full signatures and official stamp of the said officer, namely:--

"Zero-rating has been claimed on this bill of export".

(5) The officer-in-charge may, for reasons to be recorded in writing and after taking permission from the Collector, call for any other document or information not specified in sub-rules (1), (2), (3) and (4) in support of the refund claim or for the purpose of satisfying himself about the genuineness and admissibility of the claim.

10. Refund claim of an investor.-- (1) An investor, in addition to the documents specified in sub-rule (2) of rule 9, shall submit an undertaking on a non-judicial stamped paper that he shall commence production and supply of taxable goods within a period of two years of the receipt of refund.

(2) If the investor fails to commence production and supply of taxable goods within the period specified in sub-rule (1) or within such further period as may be allowed by the Collector, the amount of sales tax refunded to him shall be recovered from him along with additional tax and penalty as provided in the Act.

11. Refund under section 66.-- A registered person who claims refund under section 66, in addition to the documents specified in sub-rule (3) of rule 9, shall file an application of refund indicating.--

(i) his name, his address and registration number;
(ii) date of application;

(i) amount of sales tax refund claimed; and
(ii) reasons for seeking refund.

12. Profiling of exporter for the purpose of refund.-- (1) Each Collectorate shall develop profile of exporters categorizing them into "Gold", "Silver" or ‘Others’ on the basis of the criteria specified in this rule.

Explanation:-- "For the purpose of this rule, exporter means manufacturer-cum-exporter and commercial exporter".

(2) The exporters fulfilling the following conditions shall be rated as category "Gold", namely:--

(i) for limited companies:

(a) certified Books of Account for the last eighteen months;

(b) either certified accounts show amount of exports, domestic sales or a separate statement by the concerned Chartered Accountant firm regarding amounts of export or domestic sales;

(c) bank or bank’s certificate for the last three years’ export performance;

(d) six months account having been audited by Sales Tax department during last twelve months indicating at least ninety per cent claim acceptance level in terms of value; and

(e) payment by crossed cheque encashable in any of the bank branches issuing the certificate in clause (c).

(ii) other than limited companies:--

(a) export registration of three years or more;

(b) bank certificate-conforming availability of loan credit limit equal to four times the value of an individual claim to be sanctioned;

(c) bank certificate for last three years’ export performance;

(d) six months accounts having been audited by Sales Tax department during the last twelve months indicating at least ninety per cent claim acceptance level in terms of value; and

(e) refund cheque shall be issued as encashable through the bank branch issuing the certificate in clause (c)"

(3) The exporters fulfilling the following conditions shall be classified as category "Silver", namely:--

(a) new enterprises and new exporters having export registration of less than three years but with at least one year’s valid registration;

(b) bank certificate for export performance since the date of export registration;

(c) verification by the Collectorate (through fax, E-mail, post, courier or in person) of bank certificate mentioned in clause (b) within the period of fifteen days;

(d) six months accounts having been audited by Sales Tax department during the last twelve months indicating at least ninety per cent claim acceptance level by value; and

(e) bank certificate for loan limit indicating credit limit being not less than four times the amount of claim, which shall be verified, by the Collectorate, from the respective bank branch within the said period of fifteen days.

(4) The following class of exporters shall be treated as category "Other", namely:--

(a) Persons not falling under categories "Gold" and "Silver";

(b) persons disqualified in category "Gold" or category "Silver" shall be down-graded to category "Other" directly if their claim acceptance levels under audit are less than ninety per cent or forged or untrue documents are submitted;

(c) once an exporter is down-graded, he shall not be up-graded for at least eighteen months and will only be considered by the Collector for upgrading, if he is satisfied that during the eighteen months down-grading period, the exporter has met the requirements of respective category for continuous period of eighteen months; and

(d) persons involved in a prosecution case of tax fraud under the Act or any other tax shall be rated in category "Other" even if they fulfill rating criteria for "Gold" or "Silver".

(5) The exporters falling under the category "Gold" shall be allowed refund within seventy-two working hours from the date of receipt of supportive documents if the refund is genuine and admissible on the basis of such documents.

(6) Exporters falling under the category "Silver" shall be allowed refund within fifteen days of receipt of supportive documents if the refund is genuine and admissible on the basis of such documents.

(7) The refund claims of exporters falling under category "Other" shall be sanctioned after through scrutiny and verification and refund shall be allowed within the time-limit specified in sub-section (2) of section 10 of the Act.

(8) If a person in a lower category improves whether on the basis of audit or on the basis of other prescribed criteria, his category rating shall be upgraded accordingly, on the basis of a review by the Collector on six monthly basis on the recommendations of a Review Committee comprising representatives of the Export Promotion Bureau, Collectorate of Sales Tax. Chamber of Commerce and Industry, and exporter’s respective association, if any, of which the exporter is a member.

(9) The Review Committee shall select a Secretary whose name, address and fax number, if any, shall be notified for the information of all exporters.

(10) The Review Committee shall meet every month to review--

(a) the cases rated or categorized six months earlier;

(b) reference from any organization for down-grading of rating or category of any exporter; and

(c) reference from any exporter for up-gradation of his category".

13. Miscellaneous: (1) All such refund claims that have not been subjected to pre-sanction inquiry or audit shall invariably be audited subsequent to payment by the Audit Division.

(2) In cases where it has been found during post-payment audit that refund has been paid in excess of the claimant’s entitlement, excess paid amount shall be recovered along with additional tax and penalty as provided under the Act.

(3) The refund claims of a registered person found indulged in tax fraud shall not be finalized before through pre-audit.

(4) The refund claims shall be processed and finalized on ‘first come first served’ basis.

14. Saving.-- The genuine and admissible refund claims sanctioned and paid in pursuance of Board’s instructions contained is its letter C. No. 3(39)STP/96, dated 21.10.1998 shall be deemed to have been validly sanctioned and paid under these rules.

15. Repeal.-- The Sales Tax Refund Rules, 1998, are hereby repealed.

[C. No. 3(10)STP/2000]

Sd/-
(ABDUL RAZZAQ)
Secretary (STP)

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