The Federal Board of Revenue (FBR) has directed 100 unregistered retailers (Tier-1) to integrate them with the FBR’s Point of Sale (POS) system by March 10, 2023, to avoid denial to input tax credits.
In this connection, the FBR issued Sales Tax General Order (STGO) 8 of 2023 on Friday.
The FBR’s directive said that upon the filing of a Sales Tax Return for the month of January 2023 for all hereby notified T-lRs 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.
The FBR’s STGO revealed that the said big retailers are required to be integrated with the Board’s POS system. The list of 100 identified retailers revealed that the big retailers are not registered with the sales tax department for the purpose of the POS and they are also not depositing collected sales tax from consumers into the national exchequer.
Last month, the FBR issued a list of 124 big retailers (Tier-1), which are required to be integrated with the FBR’s POS system and were denied a 60 percent input tax credit in case of non-integration. The number of big retailers (Tier-1) now stand at 100, which are required to be integrated with the POS system.
The board has decided to raise sales tax demand against these big retailers (Tier-1), who are still not integrated with the FBR’s POS system by the deadline of Feb 10, 2023.
The Finance Act, 2019 added sub-section (6) to section 8B of the Sales Tax Act, 1990 (“the STA, 1990”), whereby, a Tier-l Retailer “(T-1R)” who did not integrate its retail outlet in the manner prescribed under sub-section (9A) of section 3 of the STA, 1990 during a tax period, its adjustable tax for that period would be reduced by 15 percent. The figure of 15 percent has been raised to 60 percent vide Finance Act, 2021.
In order to operationalize this important provision of law, a system-based approach has been adopted, whereby, all Tiers that are liable to integrate but have not yet integrated, with effect from July-2021 (Sales Tax Returns filed in August 2021) are to be dealt with as per the procedure laid down in STGO No I of 2022 issued on 3rd August 2021.
The procedure of exclusion from this list of identified Tier-I shall apply as laid down in STGO 17 of 2022 dated May 13, 2022, the FBR added.