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A sales tax refund occurs when a registered person has overpaid sales tax due to an error. In such cases, the individual may request a refund from the relevant tax authorities within one year after the payment or after the decision or order causing the refund is announced, from the end of the period for which the claim is made.
Kakakhel Law Associates experts are highly knowledgeable in the rules, regulations, laws, and procedures for obtaining refunds for overpaid sales tax. Section 66 of the Sales Tax Act, 1990 addresses the refund issue, specifying that claims must be made within one year. Refunds for taxes claimed to have been overpaid due to error or misunderstanding, or refunds related to input adjustments not claimed within the relevant tax period, will not be allowed unless the claim is filed within one year of the payment date. Additionally, if a registered person fails to deduct input tax within the relevant tax period, the Commissioner may allow the adjustment within a specified tax period after confirming that the input tax is due and admissible.
When a registered person has paid input tax on taxable purchases that exceed the output tax due to zero-rated local supplies or exports made during that tax period, the excess input tax will be refunded within forty-five days of the refund claim.
The monthly sales tax return filed by the claimant is treated as a refund claim if all the necessary data and supporting documents are provided. If the claimant fails to submit the claim within sixty days of filing the return, no refund will be processed.
If a registered person has overpaid sales tax due to an error, they 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 the claim is made.
Refunds can be claimed by the following registered persons:
The concerned institute for processing refunds is the Regional Tax Office (RTO) or the Large Taxpayer Unit (LTU), depending on the case. Registered persons can now also claim sales tax refunds through the FASTER SYSTEM.
A centralized system for online payment of Sales Tax/FED refunds has been established, so taxpayers are advised to update their IRIS profile promptly to avail the electronic transfer facility.
To obtain a refund for excess sales tax paid, a taxpayer (RP) must be aware of the relevant provisions in the Sales Tax Laws, Rules, Procedures, SROs, Rulings, and Instructions, as outlined below:
If a refund is due due to a decision or judgment from an Inland Revenue officer, Court, or Tribunal, the one-year period is calculated from the date of the judgment or decision. Applications filed under Sec. 66 must be disposed of within 90 days from the filing date. According to Sec. 67, if a refund is not processed within the specified time, the claimant will receive additional interest at the KIBOR rate per annum on the refund amount, starting from the expiration of the specified period until the day before the refund is paid.
Refunds may also be paid via sales tax bonds under Sec. 67-A, issued by the FBR Refund Settlement Company Limited, which is licensed by SECP. These bonds have a three-year maturity period and bear a simple profit of 10%, with no compulsory Zakat deduction.
The primary issue in refund claims is the excess input tax paid by a registered person on taxable purchases during a tax period, which exceeds the output tax due to zero-rated or export supplies. This excess input tax must be refunded to the registered person within 45 days of filing the refund claim. Excess input tax related to supplies other than zero-rated or export can be carried forward to the next tax period, along with non-adjustable input tax as per Sub-sec. (1) of Sec. 8B.
Our services include Income tax returns, Sales tax and wealth statement as well.
Additionally, various rules address specific refund situations, such as refunds for recognized agricultural tractor manufacturers or sales tax adjustments for fertilizers.