ISLAMABAD: Federal Board of Revenue (FBR) has detected about 89 big retailers for a compulsory integration of their transactions.

FBR in this regard issued Sales Tax General Order (STGO) No. 05 of 2023 for Tier-1 retailers to integrate their businesses with the FBR’s Point of Sale (POS) System.

According to Sales Tax Act, 1990 updated up to August 22, 2022, the definition of Tier-1 Retailer is:

“Tier-1 retailer” means a retailer falling in any one or more of the following categories, namely:-

(a) a retailer operating as a unit of a national or international chain of stores;

(b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;

(c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand;

(d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”;

(e) a retailer, whose shop measures one thousand square feet in area or more or two thousand square feet in area or more in the case of retailer of furniture;

(f) a retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan;

(g) a retailer whose deductible withholding tax under sections 236G or 236H of the Income Tax Ordinance, 2001 (XLIX of 2001) during the immediately preceding twelve consecutive months has exceeded the threshold as may be specified by the Board through notification in the official Gazette; and

(ga) a person engaged in supply of articles of jewellery, or parts thereof, of precious metal or of metal clad with precious metal excluding a person whose shop measures three hundred square feet in area or less;

(h) any other person or class of persons as prescribed by the Board.

The latest STGO stated that the Finance Act, 2019 added sub-section (6) to section 8B of the Sales Tax Act, 1990 whereby a Tier-1 Retailer “(T -lR)” who did not integrate its retail outlet in the manner prescribed under sub-section (9A) of section 3 of the STA, 1990 during a tax period, its adjustable tax for that period would be reduced by 15 per cent.

The figure of 15 per cent has been raised to 60 per cent vide Finance Act, 2021.

In order to operationalize this important provision of law, a system-based approach has been adopted whereby all T-IRs who are liable to integrate but have not yet integrated, with effect from July-2021 (Sales Tax Returns filed in August, 2021) are to be dealt with as per the procedure laid down in STGO No.1 of 2022 issued on August 03, 2021.

Vide the instant Sales Tax General Order, a list of 89 identified T-IRs has been placed on FBR’s web portal at www.tbr.gov.pk allowing them to integrate with FBR’s system by December 12, 2022 and the procedure of exclusion from this list of 89 identified T-1Rs shall apply as laid down in STGO No. 17 of 2022 dated 13.05.2022.

Upon filing of Sales Tax Return for the month of November, 2022 for all hereby notified T-1Rs not having yet integrated, their input tax claim would be disallowed as above, without any further notice or proceedings, creating tax demand by the same amount.