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On Tuesday, the Federal Board of Revenue (FBR) voted to deny 60% of refund claims to top-tier shops that continue to refuse to link their sales counters with tax systems to conceal their actual sales.
The decision to refuse tier-I merchant’s 60 percent input represents a significant reversal in the FBR approach after the taxmen struggled to meet growing point-of-sale objectives.
The government decided in the Finance Act 2019 that tier-I merchants that refused to connect with the FBR’s online system would be penalized by withholding refunds of up to 15% of their claims. This percentage has now been increased to 60% as a result of the Finance Act 2021.
The FBR issued a Sales Tax General Order on Tuesday to implement the new punitive provision of the law.
The FBR announced a system-based strategy in which all recognized tier-I merchants will be posted on the FBR’s website by the fifth of each month, allowing them to integrate with the FBR system within the next five days.
If a notified FBR tier-I retailer asserts that it is not a tier-I retailer under the law’s definition and so is not obligated to integrate with the FBR system, it will request removal from the list within the following 10 days.
The single most significant project outlined in the budget by Finance Minister Shaukat Tarin is to improve revenue collection through the connection of Point of Sales (POS) with the FBR database. The minister has presented the POS initiative to the International Monetary Fund (IMF) as the most important income generator for meeting the Rs5.829 trillion yearly objective set for the current fiscal year.
According to the FBR, upon filing the sales tax return for July by all informed tier-I shops who are not integrated, the input tax claimed would be rejected without further notice or processes, resulting in a tax demand of the same amount.
Tarin has stated that he plans to connect 500,000 points of sale to the FBR system and collect Rs100 billion in taxes from shops over the next two years.
However, development has been excruciatingly sluggish thus far. IN JULY, the FBR registered 84 new shops, bringing the total number of points of sale connected to the FBR network to 11,514. Because of the slow progress toward the 500,000 objectives, the FBR was forced to immediately implement the punitive provision.
In comparison to the 11,514 machines, the real number of merchants connected to the FBR is 1,016, including 660 tier-I shops. There were also 200 textile and leather retail chains and 157 eateries. Tier-I merchants account for over 60% of all integrated people and entities, emphasizing their relevance in meeting the 500,000 POS target.