The National Board of Revenue on Thursday asked its field-level value-added tax offices to take necessary steps to provide cash refund of VAT to businesses if they had refundable VAT or paid in excess amount.
Field offices do not need any budget allocation for providing refund and respective VAT officials can approve refund application as per the General Financial Rules, the board said in an instruction to its 12 VAT Commissionerates.
In the instruction, the board asked the offices to settle the refund application related to VAT following the existing rules and regulations of the VAT and Supplementary Duty Act 2012 and VAT and SD Rules 2016.
Officials said that businesses usually would not get cash refund of VAT due to procedural complexities as well as misconception of VAT officials.
Traders were required to mention the economic code in the refund application for getting refund while VAT officials would hardly approve the application citing that there were no allocations under the economic code, they said.
NBR issued the instruction, signed by NBR second secretary (VAT policy) Md Tariq Hassan, to make the refund process easier and smooth, said the officials, adding that traders would now easily get their refund in cash.
Refund might be created for several reasons including existing business process and VAT related regulations such as exemption.
For example, importers were required to pay advance tax (AT) at the rate of 5 per cent on import of all products, except few exceptions, and the AT was refundable if the trader could not adjust it with his or her payable VAT or were not registered as a VAT payer.
Refund was also created if the amount of output tax becomes lower than the input tax paid by traders or they mistakenly pay in excess amount to the government exchequer.
Some manufacturers also enjoy VAT exemption but they were required to pay VAT on procurement of goods and services which was also refundable.
Referring the provisions of the General Financial Rules of the Finance Division, the board, in the instruction, said that giving refund of collected revenue would not be considered as the government expenditure and appropriate authorities were allowed to approve the refund application.
The Finance Division on August 6, 2018 informed the board that it did not keep any economic code in the new Budget and Accounting Classification System for giving refund.
The division has also informed the Internal Resources Division after it sought allocation for refund.
Finance ministry officials said that VAT officials, after approval of refund application, would give a cheque provided by the office of the Controller General of Accounts to the applicants.
The applicants would deposit the cheque to their bank accounts and the refund money would be deposited to the account, they said.
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