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The Federal Board of Revenue (FBR) on Tuesday decided to deny 60% of the refund claims to those top tier retailers who would still resist linking their sales counters with the tax systems to hide their actual sales.

The decision to deny 60% input to tier-I retailers marks a clear shift in the FBR strategy after the taxmen struggled to achieve increasing point of sales targets.

Through the Finance Act 2019, the government had decided that those tier-I retailers that would not integrate with the FBR’s online system would be penalised by denying them refunds of up to 15% of their claims. This ratio has now been increased to 60% through Finance Act 2021.

The FBR on Tuesday issued a Sales Tax General Order to give effect to the new punitive clause of the law.

The FBR said that it was adopting a system-based approach where all identified tier-I retailers will be placed on the FBR’s website by the fifth of every month, allowing them to integrate with the FBR system in the next five days.

In case a notified FBR tier-I retailer claims that it is not a tier-I retailer as per the definition provided under the law and therefore not liable to integrate with the FBR system, it will seek exclusion from the list in the next 10 days.

Enhancing revenue collection through integration of Point of Sales (POS) with the FBR database is the single biggest initiative announced by Finance Minister Shaukat Tarin in the budget. The minister has pitched the POS initiative to the International Monetary Fund (IMF) as the biggest revenue spinner for achieving the Rs5.829 trillion annual target set for this fiscal year.

The FBR said that upon filing of the sales tax return for the month of July by all notified tier-I retailers that are not integrated, the input tax claimed would be disallowed without any further notice or proceedings, creating tax demand by the same amount.

Tarin has said that he would connect 500,000 point of sales with the FBR system and collect Rs100 billion taxes from the retailers in two years.

But the progress, so far, remains painstakingly slow. In July, the FBR had registered 84 more retailers, taking total number of point of sales that are linked with the FBR network to 11,514. The little progress towards achieving the goal of 500,000 necessitated the FBR to immediately notify the punitive clause.

Against the 11,514 machines, the actual number of retailers who are linked with the FBR are 1,016, including 660 tier-I retailers. In addition to that, there were 200 textile and leather stores chains and 157 restaurants. Nearly 60% integrated persons and entities are the tier-I retailers, underscoring their importance to achieve the 500,000 POS goal.

The FBR has already informed the finance minister that there was no huge tax potential from the drive and the FBR at best can collect additional Rs15 billion from the POS initiative in the current fiscal year as against the budgeted figure of Rs50 billion. But Tarin believes that the Rs100 billion and 500,000 POS target can be achieved.

At the end of the last fiscal year about 11,000 POS had been registered year that paid Rs14 billion in taxes, which was actually Rs500 million less than the last year.


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