ISLAMABAD: The Federal Board of Revenue (FBR) has made it mandatory for wholesalers and retailers to integrate their businesses with Point of Sale (POS) system if their deductible withholding tax exceeds Rs0.1 million or Rs0.5 million per month, respectively. This measure will enable tax authorities to assess actual sales of wholesalers, distributors and retailers to enhance General Sales Tax (GST) collection.
The government had earlier increased withholding tax rates under Sections 236G and 236H to bring retailers into the tax net. In the last fiscal year, FBR collected Rs82 billion from retailers in income tax alone. However, the government often includes collections from all traders when reporting tax revenues from business community, claiming contributions exceeding Rs700 billion.
In comparison, salaried class alone paid over Rs600 billion in income tax during the same fiscal year. Initially, this figure was reported as Rs555 billion, but after accounting adjustments, it crossed Rs600 billion mark. The FBR has now amended Sales Tax Rules, making integration compulsory for wholesalers and retailers. Although, there are millions of such businesses across Pakistan, the amendment applies only to those whose deductible withholding tax (WHT) exceeds Rs100,000 for wholesalers and Rs500,000 for retailers.
According to FBR notification issued Tuesday, “In exercise of powers conferred by Section 50 of Sales Tax Act, 1990, read with Sections 22 and 23 thereof, Federal Board of Revenue is pleased to direct the following amendments shall be made in Sales Tax Rules, 2006”. The new sub-rule added to Rule 150Q states: “Retailers whose deductible withholding tax under Sections 236G or 236H of Income Tax Ordinance, 2001 (XLIX of 2001), during immediately preceding period exceeds Rs100,000 or Rs500,000, as the case may be, shall be required to integrate their business under clause (g) of sub-section (43A) of Section 2 of Sales Tax Act, 1990”. Section 236G deals with advance tax on sales to distributors, dealers and wholesalers, while Section 236H covers advance tax on sales to retailers.
