‘FBR could slap penalties on non-compliant retailers’

KARACHI: The Federal Board of Revenue (FBR) could slap penalties on big retailers if they would continue to fail in installing automated point-of-sale system (POS) at their outlets for real-time sales documentation, sources said on Wednesday.

The sources said the retailers would not be entitled to adjustment of input tax and adjustable input tax for the entire tax period would be reduced by 15 percent in case of their non-compliance.

The FBR may also impose monetary penalty on the retailers – falling under the tier 1 category – who would fail to show their sales transactions on the FBR’s real-time software. The FBR is authorised to impose a penalty of Rs5,000 or 3 percent of the amount of tax involved, whichever is higher, under the Sales Tax Act 1990.

In case of delinquency, the FBR could also invoke provisions under which the tax authorities may initiate proceedings to arrest and conduct prosecutions.

Sources said Regional Tax Office (RTO) Karachi issued at least 300 notices to big retailers, having around 500 retail outlets. They include jewelers and shops of beauty, branded garments, footwear, and grocery.

The notices have been sent after the big retail houses could not meet the deadline of December 16, 2019 for integrating automated POS.

The retailers include those operating as units of a national or international chain of stores, in an air-conditioned shopping mall, plaza or centre, excluding kiosks, whose cumulative electricity bill during the immediately preceding 12 consecutive months exceed Rs600,000 or engaged in bulk import and supply of consumer goods on wholesale basis to retailers and consumers. Besides, a retailer is also categorised as tier-1 if his shop measures 1,000 feet in area or more.

The sources said the integration of data would help the FBR to create deterrence against smuggled or non-duty paid goods. It would also help the tax authorities plug loopholes in sales tax collection.

A tax official at RTO-II Karachi said the retailers could link their existing sale registers with the FBR simply by installing software into their computers.

The official said there is a reduced sales tax rate on online invoice generation.

The FBR sent more than 100 notices to jewelers, asking them to install the software. The sources said the FBR started mandatory registration of jewelers to link their sales and purchases with online tax system in order to monitor their transactions.

RTO Karachi sent the notices to jewelers who fall under the category of big retailers. The sources said the registration of jewelers was started as a part of campaign of documentation of big retailers falling in various sectors of the economy. The decision to make integration of transactions by jewelers mandatory was taken to discourage smuggling of gold.

Gold and other precious metals are basic raw materials for manufacturing of jewelries, but the import numbers do not match with the manufactured products.

Meanwhile, the FBR planned to document the income of people who are buying gold jewelry as an investment.