Complex FBR procedures hindering POS integration

Published August 18, 2021
The FBR has provided a new sample  invoice format for ease of understanding and method of sales tax  collection. — APP/File
The FBR has provided a new sample invoice format for ease of understanding and method of sales tax collection. — APP/File

KARACHI: Many medium- and small-sized tier-1 retailers of various types have yet to integrate their point-of-sale (POS) with the Federal Board of Revenue (FBR) for real-time reporting of sales and mystery shopping in respect to verification of invoices mainly owing to documentation challenges and complex taxation procedure.

Chainstore Association of Pakistan (CAP) Senior Vice-Chairman Asfandyar Farrukh told Dawn that around 93 per cent Tier 1 retailers associated with CAP had gotten themselves integrated with the FBR system.

He, however, said that the tax authorities have recently published a list of 6,763 tier-1 retailers all over the country who are not yet integrated with the FBR system.

Mr Asfandyar said as per the latest list, so far 211 textile/leather sector retailers and 902 other retailers nationwide as well as 168 restaurants in Islamabad have got integrated their POS with the FBR.

Around 11,744 POS terminals have been integrated with the real-time reporting system by July 31, the FBR has announced.

For speeding up the process, the FBR on Aug 9 through SRO1005 (I)/2001 announced a prize scheme to encourage tier-1 retailers to get themselves integrated with the real-time sales reporting system.

When asked why the FBR has selected tier-1 retailers initially for implementing the prize scheme and why it has not expanded to millions of retailers in the country, he said the definition of tier-1 retailers is quite broad and the Ministry of Finance is aiming to bring tens of thousands of retailers into the tax net through various initiatives.

He said the finance ministry has set a target of approximately Rs50 billion in additional taxes to be generated by documenting large numbers of tier-1 retailers during this tax year.

Finance Minister Shaukat Tarin in his budget speech had announced disbursement of Rs250 million worth of prizes per month for the customers of compliant retailers.

The prize scheme is expected to force tens of thousands of retailers to issue genuine sales tax invoices and pay tax to the government.

Under the prize scheme procedure the customers will need to submit their names and CNICs to enter a random computerised draw entitling them to prizes in respect of their purchases from the integrated tier-1 retailers.

The concept of a prize scheme is a positive initiative which CAP and its members support fully.

At the same time, he said CAP has requested the FBR chairman that consultations with tier-1 retailers should be conducted regarding its implementation so that any possible technical and operational issues are addressed proactively.

“We have sought a meeting of the FBR and CAP Central Committee for resolving some reservations and issues before commencement of the prize scheme,” Mr Asfandyar said.

Sales tax confusion

The latest sample invoice, he said, has caused confusion regarding the application of sales tax and a clarification/correction is sought given that sales tax should be applied on discounted total value.

Meanwhile, through SRO1006(I)/2021 also issued on Aug 9, the FBR has sought various information like business details, traceable invoice numbers, transaction details, tax amounts, etc. to be clearly printed on every invoice through all POS systems integrated with the FBR.

The FBR has provided a new sample invoice format for ease of understanding and method of sales tax collection which is meant to be an improvement on the previous invoice format provided earlier.

Mr Asfandyar pointed out that the Sales Tax Act 1990 has prescribed that in case of trade discounts, “value of supply” shall be the discounted price excluding the amount of tax; provided the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices.

Published in Dawn, August 18th, 2021

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