FBR slaps Rs40mln penalties on retailers

KARACHI: The Federal Board of Revenue (FBR) has imposed at least Rs40 million of penalties on retailers who failed to comply with a legal obligation to integrate their sales system with the tax authority on a real-time basis, people familiar with the matter said on Monday.

Sources said Regional Tax Office (RTO) Karachi imposed a monetary penalty of Rs1 million each on around 40 big retailers, who failed to comply with a mandatory integration with the tax portal of the FBR.

The sources said the tax office initiated an action against around 50 defaulters last month and issued notices to them with a warning of ‘harsh’ action. A tax official said out of total identified 50 retailers four installed point of sales at their outlets and another six retailers registered with the FBR and are in process of installing the POS.

The official said the retailers, who were penalised, may also face sealing of their businesses in case of their continuous failure to integrate their businesses with the FBR database.

“The monetary penalty may be waived in case the defaulting retailers agree to the integration,” the official said. The RTO Karachi initiated the harsh action after the date for integration has expired. The FBR extended the deadline of integration up to August 31 for retailers, who are required to integrate their businesses under the Sales Tax Act 1990.

In 2017, the FBR decided to bring big retailers into the sales tax net to prevent revenue leakages and identify potential taxpayers engaged in sales and purchases. A new clause – 43(A) – was added into the section 2 of Sales Tax Act 1990 to define tier-1 retailers who are required to make integration.

Under the integration, the FBR will be able to get details of transactions from retailers, including their purchases from manufacturers and importers.

The RTO Karachi in early September issued notices to retailers engaged in business of retail chains, cosmetic shops and clothing shops who have been identified during a survey. The official said the FBR had been granting extension in deadlines to the retailers for the last two years. However, the retailers did not show willingness to link their invoices with the tax authority.

The RTO Karachi was also engaged in consultations with the business association of chambers to make the tier-1 retailers aware about their mandatory compliance, the official said. The official said RTO Karachi Chief Commissioner Nazir Ahmed Shoro directed officials to ensure enforcement of tax laws and that taxpayers are facilitated to POS integration. The tax office pulled in Rs11.1 billion in September, up 60 percent from Rs6.9 billion in the same month of the last year.