ISLAMABAD, June 17: Tax officials have launched a drive in Islamabad and Rawalpindi to investigate registered restaurants they think are not complying with sales tax regulations.

It is estimated that 100 to 150 restaurants are doing business in the twin cities.

Most of them are registered with the sales tax department but officials believe that the restaurants charging sales tax from consumers are not depositing it to government exchequer.

But many restaurant owners questioned why the tax officials were not registering more than 30 restaurants in residential areas of Islamabad, owned by influential people, including politicians.

President of Islamabad and Northern Areas Hotel Association Mian Akram Farid said no one was against paying sales tax but asked the government to bring “residential restaurants” into tax net.

Restaurants in the residential areas were not only violating the Capital Development Authority (CDA) rules but also availing electricity, water and other facilities at domestic rates. As a result, restaurants in residential areas are more competitive than those in commercial areas.

But the regional tax offices of Rawalpindi and Islamabad have initiated a drive against a number of restaurants situated in their jurisdictions to “realise maximum revenue” from the sales tax, said a statement by Federal Bureau of Revenue on Friday.

Taxpayers such as these restaurants charge sales tax from customers but a number of them do not deposit it in the government treasury.

The FBR statement said Peacock restaurant on Motorway at Kallar Kahar has been charged Rs38 million in tax liability by the RTO, Rawalpindi. “The tax liability has also been upheld in first appeal by commissioner IR (Appeals-III), Islamabad. The recovery proceedings are under way,” the statement added.

According to Mr Farid, there was a possibility of lesser depositing of tax in the government revenue by some restaurants. “We will support FBR if there is any evasion of tax in the restaurant industry.”

However, he suggested that the government at the earliest stop commercial restaurants in residential areas. For him, the trend of setting up restaurants in residential areas was on the rise due to fears of bomb blasts.

Sohail Ahmad, spokesman for the Federation of Pakistan Chambers of Commerce Industry (FPCCI) and owner of a restaurant, also supported the government move to get “actual revenue” from the restaurants. However, he also asked why tax officials were not tapping restaurants in residential areas, in-house catering and guesthouses.

He said due to increase in the cost of doing business there was a possibility that some restaurants may have diverted some part of sales tax collection to their income. “But it is not possible for registered restaurants to evade the tax completely.”

He said the government should come up with a fixed taxation for the restaurants on the basis of categories. “This would help raise maximum revenue.”

Sarfaraz Haider, another businessman, also questioned the tax department's approach to “strangulate existing registered restaurants”.

He also wanted the officials to bring restaurants in residential areas into tax net.