CAP seeks removal of Tier-1 class, registration of all retailers

LAHORE: Chainstore Association of Pakistan (CAP) on Monday urged the government to simplify sales tax for retailers by removing classes of Tier-1 retailers and others and enforcing registration of all retailers except those exempted from income tax.

“To ensure an even playing field, the counter-productive categorisation of retailers into Tier-1 Retailer and other classes should be abolished,” CAP said in a statement.

It would ensure retailers of all sizes regardless of goods supplied integrate/report their full sales on real-time basis through overhaul of current FBR-POS system, making it easy-to-use and removing technical issues.

“The fixed sales tax rate must be determined to maintain a difference for integrated retailers that prefer to adjust output with input versus those that prefer only to pay sales tax on turnover and bear the input cost.”

CAP, in their budget proposals to Finance minister Miftah Ismail, stated the retail sector believed in digitalisation of the economy. The recommendations, if implemented, would ensure faster pace of documentation of revenue generation from the sectors, the trade body claimed.

CAP chairman Tariq Mehboob said the proposals were formulated after lengthy consultations with leading accountancy firms and wide variety of sectoral stakeholders. “Sales tax registration should be compulsory for all retailers except where a retailer is exempt from income tax thereby only smallest retailer will be exempt from sales tax registration.”

Registration of all retailers should be consistent in both sales tax and income tax laws, he added. CAP proposed introducing an option for only integrated/documented retailers to pay sales tax as a percentage of turnover regardless of the nature of goods supplied for specified time period of 3/5 years.

Similarly, recordkeeping and filing requirements should be simplified and mandatory filing of statutory returns by retailers irrespective of the taxation regime they opt for. Mehboob asked for current restriction for 95 percent input adjustment be removed for integrated retailers as is already allowed for listed companies, but with no cash refund.

It was also proposed to abolish sales tax withholding for integrated retailers that are companies as defined in the Sales Tax Act, 1990, saying it adds complications for supplies to the corporate segment.

He also asked for official notification of a general immunity to all retailers from sales tax and income tax assessment and audit proceedings of past tax periods for those who register and integrate with FBR within a given timeframe, unless there is definite information available to FBR from regarding tax evasion.

Further, relaxation should be provided for post-integration tax periods, except for computer balloting for audit selection and withholding tax monitoring proceedings. There should be a general immunity for integrated retailers from desk audit / amendment of assessment proceedings, Mehboob urged.

“Integrated retailers have been facing an increase in notices from field formations and this approach must be reversed to encourage broad-based integration with FBR-POS and remove the cloud of harassment which is widely prevalent.”

CAP in its proposals mentioned that small and medium-sised retailers face complications relating to FBR’s inter-alia software limitations, lack of technical expertise / resources, connectivity, and system maintenance for which integration system must be revisited, they emphasised.

“Different technical issues add to the compliance risk such as the increasing challenges, which are being faced by integrated retailers with the new National Sales Tax Return (NSTR) portal.”