The FBR said that the Finance Act, 2019 added sub-section 6 to the Section 8B of the Sales Tax Act, 1990 whereby a Tier-1 Retailer who did not integrate its retail outlet in the manner prescribed under sub-section 9A of Section 3 of the Sales Tax Act, 1990 during a tax period, its adjustable tax for the period would be reduced by 15 per cent. The figure 15 per cent has been raised to 60 per cent through Finance Act, 2021.
The FBR further said that in order to operationalize the important provision of the law, a system-based approach has been adopted whereby all Tier-1 retailers, 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 3, 2021.
Through the latest STGO No. 04 of 2022, a list of 608 identified Tier-1 retailers has been placed on the FBR’s portal allowing them to integrate with the FBR’s system by November 10, 2021 and the procedure of exclusion from this list of 608 identified Tier-1 retailers shall apply as laid down in Para 2 STGO 1 of 2022 dated August 3, 2021.
Upon filing of sales tax return for the month of October 2021 all notified Tiler-1 retailers having yet integrated, the input tax claim would be disallowed as above, without any further notice or proceedings, creating tax demand by the same amount.
KARACHI: Officials of Large Taxpayers Office (LTO) Karachi have apprised the business community that installation of Point of Sale (POS) offered reduced rate of sales tax.
A team of tax officials from Large Tax Office (LTO) Karachi visited Pakistan Business Council (PBC) on Wednesday to discuss the integration of Tier-1 retailers, a statement said on Wednesday.
The purpose of the visit was to listen and redress the grievances regarding the online integration of Tier-1 retailers / Point of Sale (POS) with the FBR system.
It was apprised to the members that the POS integration of retailers does not involve new tax, rather it gives the benefit of reduced rate of sales tax to consumers who buy the goods from integrated Tier-1 retailers.
The LTO Karachi team was comprised of officers included: Shakeel Ahmad Kasana, Commissioner-Inland Revenue (IR); Aijaz Hussain, Additional Commissioner-IR; Shoukat Ali Changezi, Additional Commissioner-IR; Abdul Hameed Mangrio Deputy Commissioner-IR; and Amjad Ali Moroojo, Audit Officer-IR.
The representatives of the PBC were: Ehsan A. Malik, Chief Executive; Samir S. Amir, Director Research; and Aman Chanchi, Unilever Pakistan.
The Commissioner-IR briefed the members regarding the scope and purpose of POS integration.
A formal presentation was given by Abdul Hameed Mangrio, Deputy Commissioner which was followed by Q&A session.
The delegation requested the members to encourage the Tier-1 retailers to get integrated with the FBR system for ease of reporting of sales and avoid unnecessary documentation besides enjoying reduced rates of tax on their supplies.
The members of the Council appreciated the outreach efforts of FBR to remove the misconception and misgivings regarding the online integration of retailers with the FBR system.
They appreciated the system and informed that Pakistan Business Council is always encouraged to promote documentation of the economy and Point of Sale (POS) is the right step in this direction.
They also assured their active engagement for making the Point of Sale (POS) integration a success story for the larger interest of the country and the documentation of the economy.
KTBA President Muhammad Zeeshan Merchant said that the ongoing enforcement for the installation of POS would result in resistance as retailers were not aware whether they were liable to integrate or not under the law.
The KTBA President highlighted the problems of lack of information regarding POS installation at a meeting with a team of officers from the Large Taxpayers Office (LTO) Karachi.
Zeeshan Merchant reiterated that the KTBA fully supports the FBRs stance on POS, being a noble cause for the documentation of the economy and further explained the problems faced by the businessmen in the implementation of POS.
Merchant said that the STGOs of Tier-1 Retailers issued by the FBR in the case of small traders is unjustified wherein even small shop holders are also included and the FBR has only fixed the criteria of turnover to implementing the POS.
FBR needs to launch a large-scale campaign for educating Tier-1 Retailers and the general masses regarding the usefulness of bringing Tier-1 Retailers on POS. In this regard, the president of KTBA has given the following suggestions:
— A unified comittee to the extent of all field offices within Karachi must be constituted to discuss POS issues and solutions at one forum. Discussion on weekly basis must be encouraged and business representatives may also be invited in this forum.
— Joint seminars having officers from FBR, members of KTBA and representatives of various business organizations must be arranged to address the issues and fears of the business committee being faced in the implementation of POS. This would vanish the resistance and pave a long way for POS. ADCR must be kept active to resolve issues like POS. This would be a harbinger of success, provided there is a positive approach all around.
— FBR should take penal actions only to the extent of clear cases falling in the definition of Tier-1 Retailers.
— Retailers are the affected ones for the reason that manufacturers hesitate giving invoices for their purchases, whereas wholesalers and distributors are found nowhere in this chain of POS. If there is no input tax available to them then how would they pay the output tax.
— To implement POS, media campaign in the form of electronic media, social media, affixing of flyers at common places must be ensured to create awareness among the masses.
— Reasonable time of four months must be given for implementation of POS to the business committee.
— One of the fears of the POS liable retailers is that their sale will reach climax due to the implementation of POS and the department would take action against them for the previous five years as well. FBR has to take a policy decisions in this regard to address their genuine fear as to implement POS, the government has to look forward and not backward to move on in the right direction.
— Service sector needs to be addressed as SRB is also pursuing integration on POS. The retailers, restaurants are therefore in confusion about whom to report in this regard.
— SRO 779(1)/2020 dated 26.08.2020 needs a Tier-1 Retailer to be a registered person with Sales Tax meaning thereby a taxpayer has to get itself registered in Sales Tax first to implement SRO 779(1)/2020.
— POS-related expenses are one of the concerns of the small traders.
— Companies providing POS machines licensed by the Board are creating issues for the retailers. Government / FBR run POS machines must be provided to avoid such issues.
— It was also suggested that those who are integrated POS should automatically be excluded from the purview of section 8B of the Sales Tax Act, 1990 as prescribed vide SRO 344(I)/2020 dated 29.04.2020.
— Taxpayers using debit / credit card machines in the past were encouraged to use to bring the economy under documentation and now the same channel is being used to bring them under Tier-1 Retailers by bringing them in the definition of Tier-1 Retailer. This creates agony among the already documented sector and businessmen are now trying to stop using this important tool of documentation anymore.
— Department must show grace in granting extension in the filing of Sales Tax Return of those taxpayers who have been integrated with POS and are now facing problem in their filing of ST return.
— In order to achieve success in the POS implementation exercise, sector-wise profiling is recommended including plastic, paper and steel sectors by virtue of which big distributors and wholesalers would come under control thereby reducing the burden on other tiers of the economy.
— In the last, the success of POS exercise depends upon efficient control on manufacturers and importers.
The meeting was conducted at LTO, Karachi and attended by: Nisar Ahmed Burki, Additional Commissioner Inland Revenue; Mukhtiar Ahmed Shar, Additional Commissioner Inland Revenue; Anees Ahmed Memon, Deputy Commissioner Inland Revenue; Khush Ahmed Din, Senior Auditor.
Besides KTBA President Muhammad Zeeshan Merchant, the other members were also at the meeting, who are included: SyedFaiq Raza, General Secretary; Mehmood Bikiya, Vice President; HarisTufail, Joint Secretary; Shiraz Khan, Librarian; and Irfan Ghafoor, Member Admin.
ISLAMABAD: Federal Board of Revenue (FBR) on Friday imposed service charges on invoices issued through Point of Sales (POS) that are integrated with the FBR system.
ISLAMABAD: Federal Board of Revenue (FBR) has been empowered to discontinue gas and electricity connections of any person who is making taxable supplies but not registered for sales tax.
ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday said that the process of licensing the IT Service Providers for integration of Tier-1 retailers will take time.
The FBR issued Rules for licensing of IT Service Providers, rendering IT services to retailers undergoing integration with FBR vide SRO 1063 (I)/2021 dated 24th August 2021.
“The operationalization of licensing regime may take some time to complete the licensing process.”
In order to facilitate the retailers and with seamless integration, the current IT service providers will continue to provide services to their clients till such time the Board notifies the licensed IT service providers.
INTEGRATION OF TIER-I RETAILERS AND LICENSING THEREOF
150ZQZH. Licensing.— (1) No person shall carry out integration of the retailers through software unless he has obtained a license under these rules.
(2) No licensee under these rules shall maintain or operate the system or provide any other service, which is not authorized under these rules.
(3) Every payment counter whether fixed or portable and generates invoices for receipt of payment either in cash or through debit or credit card shall be connected as per rule 150ZEB.
(4) Every licensee shall be bound to integrate the payment counter in the manner as prescribed under sub-rule (4), (5),(16) and (17) of rule 150ZEB.
150ZQZI. Functions of the licensing committee.— (1) The licensing committee shall function in accordance with the provisions of these rules or any other instructions, procedures, issued by the Board.
(2) Project Director Retail Monitoring Cell shall be the convener of the licensing committee located at FBR House, Islamabad. The Board shall provide secretarial and other allied support for the functioning of the licensing committee.
The Federal Board of Revenue (FBR) has issued a directive to Tier-1 retailers, urging them to integrate with the FBR’s Point of Sale (POS) System by the stipulated deadline to avoid the denial of input tax credit.
The FBR strongly rebutted the malicious disinformation campaign being spread on social media against the proposed Service Charge of Re1 to be collected on all invoices issued by Tier-1 Retailers integrated with FBR’s electronic system of real-time reporting of sales.
It is being insinuated as if the rate of the Service Charge is 1 percent instead of Rupee 1 per invoice only. “This is completely baseless and untrue.”
The nominal Service Charge @ Re. 1 per invoice of whatever denomination, would be collected under section 76 of the Sales Tax Act, 1990, and utilized to promote the integration of all Tier-1 Retailers, launch publicity campaign, and finance a special prize scheme for all customers who duly verify their invoices to determine the validity and genuineness of the invoices issued by the integrated Tier-1 Retailers, FBR added.
The malicious campaign appears to have been initiated by the vested interests who oppose POS integration, and those who continue to collect Sales Tax from the general public but do not deposit it with the Government Treasury.
FBR has re-affirmed its resolve to continue integrating Tier-1 Retailers across the country with vigor.
The FBR issued SRO 1063(I)/2021 to amend Sales Tax Rules, 2006. Through the rules, the FBR established IREN and authorized the body to check and verify any of the eventualities.
Besides, the FBR also issued a procedure for companies installing Point of Sales (POSs) at the outlets of Tier-1 retailers.
Following is the text of rules issued by the FBR:
CHAPTER XIV-BB
INTEGRATION OF TIER-I RETAILERS AND LICENSING THEREOF
150ZQZH. Licensing.— (1) No person shall carry out integration of the retailers through software unless he has obtained a licence under these rules.
(2) No licensee under these rules shall maintain or operate system or provide any other service, which is not authorized under these rules.
(3) Every payment counter whether fixed or portable and generates invoices for receipt of payment either in cash or through debit or credit card shall be connected as per rule 150ZEB.
(4) Every licensee shall be bound to integrate the payment counter in the manner as prescribed under sub rule (4), (5),(16) and (17) of rule 150ZEB.
150ZQZI. Functions of the licensing committee.— (1) The licensing committee shall function in accordance with the provisions of these rules or any other instructions, procedures, issued by the Board.
(2) Project Director Retail Monitoring Cell shall be the convener of the licensing committee located at FBR House, Islamabad. The Board shall provide secretarial and other allied support for functioning of the licensing committee.
150ZQZJ. Application for grant of licence.— (1) An application for installation, configuration and integration of point of sale (POS) machine shall be made in duplicate to the Board.
(2) No application under sub-rule (1) shall be considered, unless it is accompanied by —
(I) registration certificate issued by Pakistan Software Houses Association or Institute of Chartered Accountants of Pakistan;
(ii) audited statement of accounts for the last three financial years;
(iii) list of major clientele;
(iv) incorporation certificate under the Companies Act;
(v) National Tax Number (NTN) Certificate;
(vi) the paid up capital for the latest financial year is at least Rs.100 million or above;
(vii) registration with Sales Tax Department if required;
(viii) Computerized National Identity Cards (CNICs) of directors of the incorporated company;
(ix) undertaking that the company has never been blacklisted by any Government or Provincial department or organization and has not been involved in confirmed cases of fiscal fraud;
(x) list of projects executed in the last three years;
(xi) and any other documents required through instructions orders issued by the Board.
150ZQZK. Procedure for grant of licence.— (1) On receipt of application for grant of licence in the Board, the licensing committee shall scrutinize the document provided and it shall evaluate the eligibility of the applicant within seven days of receipt of application.
(2) The licensing committee may also carry out visits, if necessary for physical inspection to ascertain the eligibility of the applicant for licensing under these rules.
(3) The licensing committee shall send its recommendations to the Member (IR — Operations) and the Director General Retail within ten days of date of submission of the application, specifying reasons for recommending or rejection of any application under these rules.
(4) In case, the companies meet the criteria under these rules, the licensing committee shall make recommendations for grant of licences.
(5) The licensing committee shall grant the licence to the recommended companies with the prior approval of Member (IR — Operations) and Director General Retail.
150ZQZL. Right granted to the licensee.— (1) A licensee shall have the right to install, configure, integrate, operate and maintain the point of sale on real time basis in accordance with conditions of the licence issued to him.
(2)The licence granted under these rules shall be subject to provisions of the Act and shall be valid for five years from date of issuance.
(3) The licence granted under these rules shall be non-transferable and shall not be allowed to be use by any sub-contractor.
150ZQZM. Renewal of licence.— (1) The application for renewal of licence shall be made to the Board three months before its expiry.
(2) The licensing committee shall evaluate the application and make recommendations to the Member (IR — Operations) and Director General Retail for renewal of licence.
(3) The licensee shall be required to comply with all the provisions of these rules for the renewal period.
150ZQZN. Technical support.— (1)The licensee shall be responsible for post deployment maintenance of Point of Sale as detailed below:
(a) setting up and maintenance of all information technology equipment connected to point of sales; and
(b) the licensee shall be authorized to,
(i) upgrade of the system hardware and software;
(ii) all bug fixes; and
(iii) immediate response to troubleshooting of any post deployment problems for uninterrupted working of the system.
(2) The licensee shall be responsible for safe and secure capture of real-time transmission of sales data from the retails outlet to FBR database at all times.
150ZQZ0. Responsibilities of the Project Director.— The Project Director shall be responsible for overall supervision of the system and the steps taken to address problems encountered during the operation of the systems.
150ZQZP. Procedure for cancellation or termination of licence.— (1) The Project Director shall immediately refer the matter to the licensing committee for further action under these rules, if he, as a result of supervision of the system or on receipt of a report from any of the Commissioners Inland Revenue or on a valid complaint, has reasons to believe that the licensee has-
(a) failed to provide the required services to the satisfaction of the Board authorities;
(b) contravened any condition of the licence;
(c) contravened any provision of these rules or the Act; or
(d) violated any applicable law while carrying out activities of licence under these rules.
(2) On receipt of reference from the Project Director under sub-rule (1), the licensing committee shall cause to serve a notice upon the licensee within fifteen days of receipt of reference, to show cause within thirty days after the date of the notice, as to why the licence issued under these rules should not be cancelled or terminated:
Provided that in cases where the Licensing, on the basis of material evidence, is of the opinion that there exits Prima facie a sufficient case against the licensee, it may suspend the licence to safeguard public finances and to prevent any other serious damage.
(3) The licensing committee may, after giving the licensee adequate opportunity of being heard and after examination of the record, cancel or terminate the licence issued under these rules.
(4) In case of cancellation of licence under these rules, the affected person or company shall have the right to file representation against the order of the licensing committee before the Board.
(5) The Board shall decide the representation after giving proper opportunity of being heard and the decision of the Board shall be final.
150ZQZQ. Fee and Charges.— (1) The licensee shall charge the fee for configuration and integration of point of sales from the retailers.
(2) No fee shall be charged from any of the field formation of the Board.
150ZQZR. Responsibilities of the Tier-I retailers.— The Tier-I retailer shall —
(a) make all payment counters comprising of point of sale at each out let, available for installation of the systems;
(b) be responsible for smooth functioning of point of sales;
(c) report to the Board and the concerned Commissioner Inland Revenue within twenty four hours of any operational failure, damage disruptions or tampering of the system; or
(d) report any inoperative point of sale to the Commissioner Inland Revenue holding the jurisdiction.
150ZQZS. Functions of Commissioner Inland Revenue.— (1) The Commissioner having jurisdiction, shall monitor proper and uninterrupted operation of the system through periodic visits by an officer of Inland Revenue authorized in this behalf.
(2) Where a Tier-I retailer does not account for sales without generating an invoice countering QR code or FBR invoice number, the Commissioner shall compute the taxes on such goods relating to unaccounted invoices, and recover the same under the relevant provisions of law.
150ZQZT. Establishment of Inland Revenue enforcement network.— The Board shall establish Inland Revenue enforcement network which shall be responsible for combating evasion and leakage of taxes payable on goods by way of co-coordinating with enforcement units of the concerned filed formations.
150ZQZU. Functioning of IR enforcement network.— To check and verify any of the eventualities, the enforcement squads of Inland Revenue shall petrol the outlets, verify the invoices and report such invoices to Commissioner Inland Revenue on which due taxes have not been paid. The Commissioner, after receipt of report from enforcement network, shall recover the tax in accordance to the provisions of the Act.
