FTO Orders FBR To Fix Refund System Flaw

The Federal Tax Ombudsman (FTO) has instructed the Federal Board of Revenue (FBR) to urgently correct a technical defect in its FASTER sales tax refund system, warning that the issue is delaying exporters' refunds and undermining the integrity of the automated refund mechanism.

FTO Zafar Hijazi issued the directive on Friday while hearing a complaint submitted by Karachi-based exporter M/s Quality Towellers.

According to the ombudsman, the core issue is that the FASTER system cannot distinguish between commercial export Goods Declarations (GDs) and non-commercial sample export GDs. As a result, it incorrectly generates a "GD Not Realised" objection and shifts an exporter's entire carry-forward refund claim into manual processing, instead of withholding only the relevant portion as required under Sales Tax General Order No. 09 of 2023 and the Sales Tax Act, 1990.

The problem particularly affects exporters who send product samples through courier services, as these shipments do not require the realization of export proceeds and are not eligible for sales tax refunds. However, their sample GDs are automatically imported into the IRIS sales tax return system and cannot be removed, leading to unnecessary objections during refund processing.

During the proceedings, Pakistan Revenue Automation Ltd (PRAL) informed the FTO that it only receives export GD data from Pakistan Customs through an automated interface and has neither the legal authority nor the technical ability to modify or correct the information.

Describing the issue as a "systemic and hazardous loophole" that could harm Pakistan's export sector, the FTO directed the FBR's Inland Revenue and Customs Wings to work jointly and resolve the flaw without delay.