Collection of Rs50bln tax through POS hangs in balance

LAHORE: The Federal Board of Revenue’s (FBR) target of collecting additional Rs50 billion from Point-of-Sale (POS) integration might be in jeopardy because of a surge in system glitches.

The FBR has fixed this target along with registering 50,000-60,000 new POS, also known as electronic cash registers, in the ongoing fiscal year with a target of 500,000 POS over the next few years.

Meanwhile across the country there are only 67,000 debit/credit card swiping machines actively installed at various businesses including retailers, restaurants, etc. On average, a retailer has installed two or three card machines of different banks. Thus an estimated 20,000 total POS can be potentially tapped on the basis of total card machines data. Out of which, most large and medium-sized brands have already integrated with the FBR’s POS system across Pakistan.

After targeting large chain stores in major malls and markets, the FBR is now going after medium-sized and small malls, non-registered superstores/supermarkets, and non-branded stores in various markets for getting them sales tax registered and integrated with the POS system.

There are many Air Conditioned shopping malls and large markets in various parts of Pakistan like Panorama Center Lahore, Saima Pari Mall, Zainab Market Karachi, Jan Mall Peshawar, Ghakhar Mandi Mall Rawalpindi, and markets like Anarkali, Karim Block Market, Saddar Market, Tariq Road and others are being targeted for the POS integration. However, the integration of these businesses is challenging both for the FBR and the businesses due to various issues.

Many businesses located in such areas have not installed electronic cash registers or computerized sales management systems nor do they have access to reliable internet. Further, the owners and staff of these businesses are unaware of data entry practices and sales tax compliance procedures. Moreover, the high cost and maintenance of software plus hardware to run an integrated system are also an additional burden. Moreover, currently the retailers are operating with two mandatory off-days and 20-30 percent reduced hours due to pandemic restrictions notified by the NCOC, which means less time to implement such major changes to their businesses.

On the other side, the FBR needs to help resolve many technical problems faced by the existing integrated retailers. As per the intention, an FBR invoice number is generated after syncing and seen in the retailer system too. Alongside another invoice is generated to the customer with a QR code through which they can verify by different means.

In practice, sometimes duplicate invoices are posted in the system or retail system, which generate multiple entries in sales tax returns. Further, invoices are being generated in the FBR system but not seen in the retail system and vice versa therefore are not verifiable.

Moreover, invoices are not accurately shown in the FBR system even if it is giving them to customers and cannot be verified promptly. Further, sometimes invoices in the FBR system are updated late due to system delay or connectivity issue. Such invoices are posted to back or future dates instead of the date the sale had occurred. It creates further problems especially if the business was closed on that date due to NCOC restrictions or public holiday. Thus, the retailers have to re-enter the invoice number manually at the time of filling the sales tax returns. If entered manually, sometimes it can take two to four weeks to update in the system, while retailers have to keep checking the status of which invoice is updated and which is still pending. These issues could be a major hurdle for the upcoming prize scheme being organised by the FBR and could cause unnecessary rows between customers and compliant retailers.

Another complication is that different retailers are using different companies’ POS software and POS services providers have their own issues ranging from software limitations, connectivity to system maintenance.

Retailers are using both internationally and locally produced software but it takes time to customize it to individual retailer requirements. On the other hand, many functions and support are missing in locally made software and sometimes service providers are unable to tailor their services according to the retailers’ needs and new changes notified by the FBR. Even minor changes in software can take up to over a month due to limited expertise or resources of many service providers.

Lastly, online sales through website and retailer sales system are processed differently altogether. The retailers face huge technical issues to integrate and connect the two types of sales as two different software are being used for this. One is being operated on cloud platform and creating orders there. The retailers have to automate punching of order after confirmation of the orders received online similar or manually punch them like at retail shops.