‘Wrong’ sales tax calculations: Top 10 retailers of branded garments approach PM

ISLAMABAD: Pakistan’s top 10 retailers of branded garments have approached Prime Minister Imran Khan against the wrong sales tax calculations of the Federal Board of Revenue (FBR) Portal, denying legal right of sales tax adjustment against the credit notes.

According to a joint representation of retailers’ association to the prime minister on Friday, as per section 9 of the Sales Tax Act, 1990 [Act] read with Rule 20 of the Sales Tax Rules, 2006 [Rules], tax invoice issued by a registered person can be amended/modified/cancelled through issuance of credit note as a result of cancellation of supply or return of goods or a change in the nature of supply or change in the value of the supply.

It is imperative to highlight that sales made by Tier-1 retailers, as defined in clause (43A) of section 2 of the Act, to the end consumers are integrated with the FBR’s computerized system for real-time reporting of sales in line with Chapter XIV-AA of the Rules.

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Further, it is of significant importance to bring into consideration that in case of sales return, credit note (Sales Return invoice) is issued by Tier-1 retailers in accordance with the above-referred provisions of the Sales Tax Act, 1990.

The IRIS portal of the FBR is also accepting this position and accepting credit notes issued by Tier-1 retailers, however, surprisingly, Sales Tax adjustment, relating to credit note(s), which is allowed in one month are being added back in sales tax liability of the next month in field number 7A of the IRIS based sales tax return.

This practice of the sales tax return portal is strictly against the law. If such illegal restrictions are imposed on Tier-1 retailers, who have invested huge amounts in hardware as well as software for integration of sales tax reporting with FBR, how would it be possible for the FBR to attract other retailers to get themselves registered with the FBR.

Instead of appreciating the efforts of Tier 1 retailers, they are being denied their legal and legitimate right of sales tax adjustment on credit notes.

Due to the above issue, majority of the Tier 1 retailers are still unable to file sales tax return for the month of January 2022 onwards. It is requested to kindly ask concerned person/department to resolve this issue at earliest to enable Tier 1 retailers to submit their sales tax return, the joint representation added.

Copyright Business Recorder, 2022