FBR lines up incentives for retailers on disclosure

KARACHI: The Federal Board of Revenue (FBR) on Wednesday introduced a major tax incentive for big retailers, who’ve digitally integrated their trade transactions with real-time point of sale system of the tax authority.

The input tax adjustment – adjustable against the output tax – is now permissible for retailers who linked their sales/purchases with the FBR system, known as point-of-sale (POS) application. Sources in Regional Tax Office-II, Karachi said the latest grant of input adjustment incentive to tier-1 retailers is aimed at to encourage retailers to disclose their transactions on real-time basis.

The registration and integration are mandatory for tier-I retailers. Previously, the FBR bounded such retailers to integrate POS into their computers by December 15, 2019. In order to give an opportunity to retailers for integration, the FBR extended the last date up to March 31, 2020. The deadline was further extended to April 30, 2020 as lockdowns due to outbreak of coronavirus adversely impacted the economic activities.

The sources said April remained under lockdown and therefore the date might further be extended.

Under the Sales Tax Act, 1990, all retailers falling under category of tier-1 are required to integrate their outlets with the FBR’s online system for monitoring of sales and purchases.

The tier-1 retailers include those operating as units of a national or international chain of stores, in an air-conditioned shopping mall, plaza or centre, excluding kiosks, whose cumulative electricity bill during the immediately preceding 12 consecutive months exceed Rs1.2 million or those engaged in bulk import and supply of consumer goods on wholesale basis to retailers and consumers. Besides, a retailer is also categorised as tier-1 if his shop measures 1,000 feet in area or more.

The FBR issued a statutory regulatory order (SRO 344(I)/2020) to allow input tax adjustment to all Tier – I retailers who integrated with the FBR.

The FBR said the tier-I retailers might adjust input tax to the extent of 95 percent of the output tax. Under a section (8B of Sales Tax Act, 1990), a registered individual is not allowed to adjust input tax in excess of 90 percent of the output tax. However, the law empowers the FBR to extend the facility of input tax adjustment up to 100 percent to sectors of the economy through a notification. In October last year, the FBR allowed input adjustment and refunds to electrical energy sector, oil marketing companies and petroleum refineries, fertiliser manufacturers and zero-rated suppliers, including exports, provided that value of such supplies exceeds 50 percent of value of all taxable supplies in a tax period. Further the sectors, including distributors, gas distribution companies, telecommunication services, Pakistan Steel Mills and Bin Qasim have also been allowed 100 percent input adjustment.