CNIC, NTN data to target thousands of unregistered distributors

SOHAIL SARFRAZ

ISLAMABAD: The basic information of computerised national identity card (CNICs) numbers and National Tax Number (NTNs) would primarily target thousands of unregistered wholesalers, distributors and dealers, who are already liable to be registered under the Sales Tax Rules.

Sources told Business Recorder that more than 90 percent of the supplies are being made by the manufacturers to the unregistered wholesalers, distributors and dealers of all essential commodities and items. These businessmen have to be registered with the sales tax department as they are directly obtaining supplies from the manufacturers, who are avoiding sharing of basic information with the tax department.

The major documentation measure of the Federal Board of Revenue (FBR) to obtain the CNICs/NTNs from the unregistered buyers/sellers would bring these potential wholesalers, distributors and dealers within the documented regime as per current provisions of the law. However, this documentation measure would not focus on small traders, individuals or consumers who are not directly purchasing goods from the manufacturers.

The manufacturers are also reluctant to share information about their wholesalers, distributors and dealers, who are purchasing huge qualities of goods from them. The manufacturers try to misguide the tax officials that unregistered persons are making most of the purchases from them and they cannot give any particulars of these unregistered purchasers.

The FBR's documentation move would mainly target these unregistered persons within the supply chain by obtaining basic information from the manufacturers. These wholesalers, distributors and dealers are bound to obtain the sales tax registration, but they are evading the authorities to avoid payment of sales tax and documentation of their business transactions.

Sharing an interesting aspect of the documentation exercise, experts were of the view that if the manufacturers make sales to the registered persons then the scope of stocking and holding the daily use items would be minimised and the prices of these items would drop to a reasonable extent, which was experienced in early days of implementation of the condition of providing NTN/CNIC.

Sources said that a wrong impression has been created by some persons that the move to obtain the CNICs/NTNs of the unregistered buyers and sellers would affect all kinds of businessmen. The factual position is that the unregistered wholesalers, distributors and dealers etc have to obtain sales tax registration as they are purchasing huge quantity of goods directly from the manufacturers. All such potential wholesalers, distributors and dealers would be documented by obtaining their CNICs or NTNs from the concerned manufacturers within the supply chain. This documentation measure would not have any implications over small shopkeepers, retail outlets or traders, who are not involved in direct purchase of goods from manufacturers.

According to the Sales Tax Rules, every wholesaler (including dealer) and distributor is required to be registered as sales tax registered person. According to experts, major sales of manufacturers go to the wholesalers and distributors. These wholesalers, dealers and distributors thereafter supply the goods to the retailers for onward sale to consumers. For example, sugar, vegetable ghee, tea, milk, bread, mineral water, cement, and items of daily use reach the retailers through the wholesalers/dealers/distributors. It is very rare that the consumers directly make purchases from the manufacturers. This situation can only arise in case of cement which is purchased in the form of hundreds of bags of cement who can easily provide his NTN/CNIC. In the light of these facts, no justification is available to the manufacturers for not providing NTN/CNIC of their buyers who invariably fall under the category of wholesalers, dealer and distributor, sources added.

It is important to mention that the relevant provision of the Sales Tax Rules pertaining to registration says: 4. Requirement of registration.- The following persons engaged in making of taxable supplies in Pakistan (including zero-rated supplies) in the course or furtherance of any taxable activity carried on by them, if not already registered, are required to be registered in the manner specified in this Chapter, namely:-

17[(a) a manufacturer not being a cottage industry;]

(b) a retailer whose value of supplies, in any period during the last twelve months exceeds five million rupees;

(c) an importer;

(d) a wholesaler (including dealer) and distributor; 18[* * *]

(e) a person required, under any other Federal law or Provincial law, to be registered for the purpose of any duty or tax collected or paid as if it were a levy of sales tax to be collected under the Act 19[; and]

20[(f) a commercial exporter, who intends to obtain sales tax refund against his zero-rated supplies.