KARACHI: Pakistan Business Council (PBC) has recommended to reduce the further sales tax to one per cent in order to discourage flying invoices.
The PBC in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) recommended reduction in further tax to address the issue of flying invoices.
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The PBC said that at present, general rate of sales tax is 17 per cent and another 3 per cent further tax is also applicable incase supplies are made to unregistered persons.
The council said that further tax at 3 per cent incentivizes issuance of flying invoices by unscrupulous persons. In order to discourage issuance of flying invoices and to encourage proper reporting of sales, rate of further tax should be reduced down to 1 per cent or to maximum 1.5 per cent.
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The PBC made this recommendation to document the economy and providing a level playing field for the formal sector.
Earlier, the PBC suggested measures for preventing misuse of POS by importers who use fake registration profile of retailer.
In order to avail / misuse reduced rate of sales tax at 12 per cent on supplies of textile (which is available on supply of finished textile article through integrated POS system for retail outlets), some unscrupulous persons, after importing raw materials get tolling bills issued in their name from other manufacturers.
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Thereafter, such imported raw material is being sold as finished textile article through POS integrated with FBR system to avail reduced sales tax rate of 12 per cent.
FBR, view notification dated January 4, 2022 has already clarified that bulk supply through POS is tantamount to be treated as wholesale and hence would be chargeable to standard rate of 17 per cent sales tax.
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To prevent this unscrupulous practice, the following should be made mandatory for entities whose imports are over 70 per cent of their output and who have a POS facility:
a) Should declare the number of their retail shops and
b) Provide the square ft. retail space, detailed address, and Google pin location of all the retail stores
c) Report per shop per month sales volume and invoices along with the monthly sales tax return.
