Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to de-register small jewelers, who do not qualify for the category of ‘Tier -1 retailers, but are compulsorily registered with the sales tax department for integration with the FBR’s system.
According to an order issued by the FTO office on Tuesday, the complaint was filed against alleged illegal compulsory registration in sales tax and issuance of show cause notice dated March 3, 2023, to impose a penalty of Rs. 0.500 million on failure to get the business integrated with FBR’s computerized system for real-time reporting (POS).
Briefly, the Complainant is an individual running business of jewelry under the business name of “Niazi Jewelers”.
The tax department (Deptt) compulsorily registered the complainant in sales tax due to suspected use of a debit or credit machine and later on, issued a show cause notice on 03.03.2023 to impose a penalty of Rs. 0.500 million on failure to integrate business with Board’s computerized system (POS).
A perusal of the compulsory registration order shows that the complainant was compulsorily registered in sales tax due to involvement in taxable activity as a ‘Tier-I Retailer’ whereas Tierl Retailers have been defined under Section 2(43A) of the Sales Tax Act 1990.
According to the sales tax provisions, a jeweler if not operating in a chain of stores or in an air-conditioned shopping mall must qualify the conditions.
The complainant submitted that no such payments had been received through debit or credit card machines since 2014 and the respective account had already been closed. Secondly, the size of the shop is not more than 300 sq ft. Thus, it appears that the complainant does not qualify for the conditions of Tier-I Retailer.
Therefore, the order for compulsory registration and show cause notice to impose a penalty of Rs. 0.500 require fresh reappraisal in light of the documentary evidence. However, the complainant already has submitted an application for deregistration vide letter dated March 27, which is pending disposal.
Passing impugned compulsory sales tax registration order and issuing show cause notice for imposing penalty when the Complainant does not qualify for ‘Tier -1 Retailers’ tantamounts to ‘maladministration’ in terms of Section 2(3)(i) & (ii) of the FTO Ordinance.
FTO has directed the FBR that the Commissioner-IR, Zone 1, RTO-1 Karachi should dispose of the deregistration application on its merit in accordance with law after affording a proper opportunity of hearing to the Complainant, FTO order added.