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June 16, 2019

Retailers need to show customers’ identity for tax credits


June 16, 2019

KARACHI: Retailers would need to furnish identity details of customers with the Federal Board of Revenue (FBR) to claim tax credits, sources said on Saturday.

The sources said large retail outlets are required under the budget 2019/20 to obtain computerised national identity card number from each customer to claim output tax.

The sources in the FBR said the Finance Bill 2019 proposed that tier-1 retailers should be required to obtain computerised national identity card (CNIC) number from individual customers to secure valid input tax, streamline sales to end consumers and ensure output tax for suppliers.

Tier-1 retailers include units of national or international chain of stores; those that operate in air-conditioned shopping mall, plaza or centre or excluding kiosks; those with cumulative electricity bill exceeding Rs600,000 during the preceding one year and a wholesaler-cum-retailer engaged in bulk import and supply of consumer goods to the retailers as well as to end-consumers.

Tax experts said the measures would encourage retailers to use CNIC numbers of those, who have never been their customers.

Tax expert Adnan Mufti at Shekha and Mufti Chartered Accountants said the law does not elaborate how the businesses might avoid or tackle the misuse of CNIC/ national tax number.

“Today, CNICs of consumers are available with all banks, telecom companies and credit card agencies. Misuse by unscrupulous elements would result in distortion of the FBR’s database,” Mufti said.

This might lead to creation of tax demands against individuals who did not purchase goods at all.

Tax experts at Ernst and Young Ford Rhodes said the Finance Bill sought to amend section 23 of the Sales Tax Act and imposed a condition on suppliers to insert CNIC number on the sales tax invoices issued to un-registered buyers.

“From a plain reading of the proposed amendments, it seems that it would be a real challenge for tier-1 retailers to secure their valid input tax,” an expert said.

Analysts at PricewaterhouseCoopers AF Ferguson said the Finance Bill 2019 proposed significant changes into sales tax law for retailers. It was proposed to include in the definition of tier-I retailers, such retailers whose shop measures one thousand square feet or more in area, they said.

It was also proposed to exclude tier-I retailers from collection of sales tax through monthly electricity bills. However, the retailers will be required to comply with other provisions of the Sales Tax Act for levy of tax on supplies.

Tax analysts said customers of tier-I retailers were proposed to be entitled to receive a cash back of up to 5 percent of the tax involved in manner and extent as may be prescribed by the board.

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