FBR barred from withholding refunds above Rs390bn

ISLAMABAD: The government has agreed with the International Monetary Fund (IMF) to limit the Federal Board of Revenue’s (FBR) outstanding tax refund stock to Rs390 billion, effectively barring the tax machinery from withholding refunds beyond the agreed ceiling. This was revealed by senior FBR officials while briefing the Senate Standing Committee on Finance and Revenue, which met with Saleem Mandviwalla in the chair here on Thursday. An FBR official added that refunds of Rs500 billion were paid during the last fiscal year. Minister of State for Finance Bilal Azhar Kiyani, during informal talks with the media before the start of the committee meeting, hinted that an IMF staff mission may arrive on September 23 or 24. The committee met to consider matters relating to tax refunds, sales tax on unsold jewellery returned under the Self-Consignment Scheme, honorarium for medical staff deployed during the Budget Session, and other financial and banking issues. The officials said the FBR had already disbursed around Rs197 billion in refunds during the first two months of the current fiscal year, up Rs40 billion from Rs157 billion paid during the corresponding period last year. The Committee was informed that the matter regarding payment of honorarium equivalent to five months’ basic pay to medical staff performing duties during the Budget Session in Parliament House has been resolved. Kayani stated that the Ministry of Finance and Revenue has issued the requisite instructions in this regard. The Committee also discussed the withholding of legitimate income tax refunds by the Federal Board of Revenue (FBR). Representatives of the affected chemical company stated that its tax refunds had remained pending for the last six years, with more than Rs270 million. The Committee observed that delayed refunds adversely affect the cash flow of businesses and must be amicably addressed. Mandviwalla highlighted that under the new system, refunds were expected to be processed within 72 hours. FBR officials assured the Committee that the matter would be resolved within one month. The Committee also directed the FBR to release the refunds and report to the Committee within 30 days. Senator Talha Mahmood stressed the need to make the FBR more taxpayer-friendly and sought details of tax refunds for the last five years. FBR officials informed the Committee that a new system had been introduced to reduce discretion, and now refunds are being issued systemically in sequence. The officials further informed the Committee that refunds amounting to approximately Rs197 billion had been issued during the first two months of the current fiscal year, compared to Rs157 billion during the corresponding period of the previous fiscal year, representing an increase of Rs40 billion. Under the IMF-related condition, the FBR cannot retain refunds exceeding Rs390 billion, and therefore refunds cannot be withheld for an extended period. Senator Abdul Qadir observed that if a taxpayer receives a refund after two years, it indicates that the refund was genuinely due. He called for action against officials responsible for unnecessary delays in the release of refunds. The Committee received a further briefing from the State Bank of Pakistan on the implementation of Foreign Exchange Circular No. 16 of June 24, 1999, regarding payment of interest/profit on Foreign Currency Accounts and measures aimed at protecting foreign investment and depositor confidence. Additionally, the Committee was also briefed on the request of the Jewellers & Gems Traders Association of Pakistan for removal of the sales tax on unsold jewellery returned under the Self-Consignment Export Scheme. The FBR Officials informed that under the Entrustment Scheme, import of unsold jewellery is exempted from sales tax after completion of the required customs documentation. The representatives of the Jewellers & Gems Traders Association of Pakistan pointed out that while exports are exempted from taxes, an 18 percent sales tax is imposed when the unsold gold and jewellery are returned under the self-consignment scheme, creating an additional burden on exporters. They also highlighted issues relating to the treatment of gold and gemstones under the relevant SRO 760(I)/2013. In view of the SRO, the Chairman of the Committee stated that the Ministry of Commerce would be invited to the next meeting to discuss the matter and resolve it amicably. Copyright Business Recorder, 2026

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