Karachi, April 23, 2024 – The Federal Board of Revenue (FBR) is contemplating the reintroduction of the prize scheme for invoices issued via Point of Sale (POS) systems to promote better documentation of retail transactions.
This move is aimed at enhancing compliance with tax regulations and curbing sales tax evasion.
The POS prize scheme, previously discontinued, incentivized customers to demand receipts containing a QR code generated by the FBR, ensuring the transactions were recorded officially. Despite the discontinuation, a nominal fee of Rs 1 per invoice continues to be collected from retail customers.
According to FBR sources, the revival of the scheme has been heavily advocated by the business community. The scheme had proven effective in encouraging retailers to issue compliant invoices due to customer insistence and the fear of being reported to the FBR.
Under the proposed relaunch, the FBR is also considering adjustments to the General Sales Tax (GST) rates to further incentivize retailers to adopt POS systems. A proposal suggests increasing the GST differential to 9% for retailers connected to the POS network, setting their tax rate at 9%, compared to the standard 18%.
Additionally, to attract more retailers to integrate POS systems, a more substantial incentive is being proposed for new entrants. It is suggested that these retailers enjoy an 8% GST rate for the first three years of POS integration, after which the rates could be reassessed based on the level of adoption.
“The proposed measures aim to enhance transparency in retail transactions and broaden the tax base,” explained an FBR official. “By making POS integration financially attractive, we can significantly reduce tax evasion, especially in high-compliance risk sectors like textiles and leather, where even the reduced 15% GST rate provides room for evasion.”
Retailers have been hesitant to adopt POS integration, fearing they might lose customers to non-compliant outlets that offer lower prices due to tax evasion. The prize scheme and the proposed tax incentives are designed to counteract these fears by leveling the playing field and making compliance more appealing.
“The introduction of a prize scheme effectively turned customers into tax compliance monitors, as they had a vested interest in ensuring their receipts were official,” noted an FBR spokesperson. “Relaunching this scheme could replicate past successes and further diminish tax leakage.”
The prize scheme initially saw success by encouraging consumers to ask for receipts, effectively making them stakeholders in the tax compliance process. Winning prizes based on receipt numbers added an element of reward to compliance, benefiting both the treasury and the consumers.
The broader strategy includes robust penalties for retailers who fail to integrate with the POS system, as well as aggressive awareness campaigns to educate the public on the benefits of demanding official receipts.
As the FBR finalizes its decision on these proposals, both consumers and retailers are keenly watching. The successful implementation of these measures could mark a significant advancement in Pakistan’s efforts to modernize its tax system and enhance compliance across the board.
