While disposing of a complaint, the Tax Ombudsman has directed FBR to issue instructions to field formations regarding Point Of Sale (POS) highlighting prerequisite conditions/qualifications for a retail outlet to integrate with FBR’s POS system laid down in section 2(43A) of the Sales Tax Act, 1990.
Briefly, the complainant, an individual deriving income from a sweets & bakery shop received notice from FBR whereby, he was required to integrate with POS as provided u/s 3(9A) read with 2(43A) of the Sales Tax Act, 1990.
Against notice, Complainant submitted a reply wherein he informed that his shop area is less than 1000sqft and annual electricity bill is less than Rs. 1.2 million, etc. but to no avail.
The complaint was later sent to the Secretary, of Revenue Division in terms of Section 10(4) of the FTO Ordinance read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act 2013. In response thereto, the Chief Commissioner IR, RTO, Sargodha submitted comments of the Commissioner-IR, Zone-I, RTO, Faisalabad.
On merits, it was contended that Complainant’s reply was received on 20.20.2023 which was under consideration. Further, the verification of the business premises is also under process.
As per Chapter XIV-A of the Sales Tax Rules 2006, Bakers & Sweets are under obligation to integrate their business with FBR’S POS system Rule 150ZB of the Sales Tax Rules 2006. Hence, no element of maladministration was involved in the case. Both parties were heard and the record was perused.
Examination of records and documents submitted by both sides transpired that there was no evidence that the sector ‘sweets and bakers’ must be integrated with FBR’s POS system. Further, this forum demanded the list of ‘Sweets & Bakers’ integrated with FBR’s POS system, and as per the list provided by the Deptt, out of 32 shops 9 shops were integrated with POS.
Deptt insisted that bakeries and sweets shops were obliged to register themselves under Sales Tax Act, 1990, and install the POS system according to Rule 150ZA and Rule 150ZB contained in Chapter XIV of Sales Tax Rules, 2006.
Conditions laid in Section 2(43A) did not apply and bakeries as a business sector were supposed to install POS. However, no express specific order from FBR could be produced from both sides. On the other hand, the AR of the Complainant insisted that for installation of POS system conditions/categories enumerated in Section 2(43A) was a pre-requisite and mandatory.
AR submitted copious references to case law establishing that principal law/statute prevails where there is a difference/inconsistency between the main statute and subordinate legislation i.e rules, the case law cited as 2001 PTD 2383 = 84 Tax 248 Supreme Court of Pakistan, 2011 PTD 543 Inland Revenue Appellate Tribunal of Pakistan. The relevant portion is reproduced;
‘‘It is now a well-established principle of interpretation of statutes that Rules which are merely subordinate legislation, cannot override prevail upon the provisions of the parent statute, and whenever there is an inconsistency between a Rule and the statute, the latter must prevail. This, however, envisages that all efforts to reconcile the inconsistency must first be made and the provisions of the parent statute prevail only if the conflict is incapable of being resolved’’.
The matter was also discussed with other field formations of FBR and none reported any such exercise whereby bakeries, catteries, or coffee shops were being registered for POS on a sectoral basis without pre-qualification of Tier-I retailers as detailed in Section 2(43A) of the Sales Tax Act, 1990.
Accordingly, FTO has directed FBR to withdraw the show cause notice dated 07.02.2023. Furthermore, FBR is to issue clear instructions to field formation to follow pre-qualifying criteria regarding POS integration provided in section 2943A) of the Sales Tax Act, 1990.