The Federal Board of Revenue (FBR) will disallow input tax adjustment of 1,680 Tier-1 retailers in case they fail to integrate with the FBR’s computerized system for real-time reporting of sales till May 31, 2024.
A Sales Tax General Order No. 01 of 2024 issued on Wednesday revealed that the Finance Act, 2019 added sub-section (6) to section 8B of the Sales Tax Act, 1990 (“the STA, 1990”) which provided that input tax of a Tier-1 Retailer “(T-1R)” who did not integrate its retail outlet in the manner prescribed under subsection (9A) of section 3 of the STA, 1990 during a tax period, would be reduced by 15 percent.
The figure of 15 percent was subsequently raised to 60 percent vide the Finance Act, 2021.
In order to streamline the process of registration and integration of Tier-1 retailers, FBR has issued S.R.O 1842(I)/2023, dated 21st December 2023, whereby retailers, whose deductible withholding tax under section 236H of the Income Tax Ordinance, 2001 during immediate preceding twelve consecutive months has exceeded Rs 100,000 have been prescribed as Tier-1 retailers under clause (g) of section 2(43A) of the Sales Tax Act, 1990.
Such retailers are liable to be registered and integrated with the Board’s computerized system for real-time reporting of sales under the Sales Tax Act, 1990 and rules made thereunder.
The FBR has issued a new STGO for the integration of such retailers who fulfill the conditions laid down in section 2(43A)(g).
In order to operationalize this important provision of law, a system-based approach has been adopted whereby all T-1Rs who are liable to integrate but have not yet integrated, w.e.f. June-2024 (Sales Tax Returns filed in July 2024) are to be dealt with as per the procedure.
- A list of 1,680 identified T-IRs, enclosed with this STGO has also been placed on FBR’s web portal at www.fbr.gov.pk allowing them to integrate with the FBR’s POS System by 31st May 2024.
- In case a notified T-1R claims that it is not a T-1R as per the definition provided in Section 2(43A) of the Sales Tax Act 1990, and therefore not liable to integrate, it shall apply to the Commissioner concerned for exclusion from the list, and the Commissioner would decide in this regard in accordance with the procedure laid down in STGO 17 of 2022, dated 13.05.2022.
- Upon filing of Sales Tax Return for June 2024 for all hereby notified T-1Rs not having yet integrated, their input tax claim would be disallowed as above, without any further notice or proceedings, creating tax demand by the same amount, FBR added.
