The Federal Board of Revenue’s (FBR) biggest documentation initiative of integration of big retailers with the FBR’s Point of Sales (POS) system may suffer a serious setback due to the alleged connivance of vendors and retailers to under-report sales and evade sales tax.
ProPakistani reliably learned that the big retailers called Tier-I retailers have started using FBR’s POS system in all major cities of the country. Retailers are displaying that their retail outlets are integrated with the FBR’s computerized system to record sales and taxes deposited. The consumers have been issued computerized receipts to be used in future prize draws of the FBR.
The data of the purchasers including their cell numbers have been fed into the system. The FBR is in the process of registration of big retailers with the help of the POS system.
The FBR had provided a list of vendors to the retailers, who were permitted to install point of sale software at the outlets of the retail outlets. The FBR has also provided names and contacts of 46 vendors operating in major cities like Karachi, Lahore, Rawalpindi, and Islamabad. These FBR’s approved vendors have installed the POS software at the business premises or retail outlets of the Tier-I retailers across the country.
The FBR has also offered incentives like a reduced sales tax rate and permission of charging Re. 1 per invoice from consumers to meet service charges to encourage registration.
According to the SRO 1006(I)/2021, the name is required to be recorded when the customer is liable for tax or credit or invoice value is above Rs. 100,000.
The POS Service Fee of Re. 1 per invoice shall be collected by the T-1 retailer from the customer and shall be deposited along with the monthly sales tax return, which is being amended to include a row for “POS Service Fee”.
The interesting part of the story is that the FBR has no mechanism to check the authentication of the installed software at the retail outlets by the concerned vendors. The FBR has not been engaged in the verification of authentication of the software installed by the vendors at the retail outlets. No such exercise has been carried out to verify the working of each software installed at the retailer’s outlets. There are very strong apprehensions that the retailers and vendors can mutually bypass or forge the software to under-report the sales at their retail outlets.
A source on strict condition of anonymity said, “Few FBR’s vendors are offering the retailers to install forged software or accurate software with different prices. Retailers have to pay higher prices for software that can cheat the FBR system. A simple button in the machine can do the whole job. The software would simply reduce the reported sales to the FBR’s computerized system. This means that the under-reporting of sales can easily be done in the connivance of the vendor. The fraud came to light when the FBR detected one such case of a vendor who installed software at the retail outlet which was forged to under-report the sales”, he added.
To deal with the situation, the FBR needs to verify the functioning and authenticity of the POS system installed at the retail outlets. There can be cases where the vendor installs software that can show no sales, fewer sales, or conceal total sales.
The FBR needs to place some foolproof mechanism to save its biggest documentation measure, the source added.
Under rule 150ZEB of the Saless Tax Rules, 2006, the registered persons (integrated suppliers) shall install such fiscal electronic device and software, as approved by the Board, available on its website with complete technical instructions for installation, configuration, and integration.
The integrated suppliers shall notify the board, through the computerized system, of all their outlets and the integrated supplier shall register each point of sale to activate the integration.