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ISLAMABAD: The Federal Board of Revenue (FBR) has implemented an electronic system from May 10, 2022, to restore the facility of input tax adjustment of big retailers through the issuance of exclusion certificates.

In this connection, the FBR has issued a sales tax general order (STGO) 17 on Friday regarding Tier-1 Retailers — Integration with FBR’s POS System —Amendment of STGO 01 of 2022.

According to the circular, the procedure for reversal of bar on input tax adjustment by 60 per cent (i.e. the exclusion), as provided for in STGO 1 of 2022 has been automated. The STGO-I of 2022 is, thus, hereby amended to the extent of reversal of bar on input tax adjustment by 60 percent/issuance of exclusion certificates.

Under the new procedure, a registered person whose adjustable input tax has been reduced by 60 per cent u/s 8B(6) of the Sales Tax Act 1990, by inclusion in STGO, shall file an application for removal of this bar/ for restoration of input tax adjustment. Application shall be filed through the system (IRIS) by selecting the relevant reason for the exclusion from the purview of the said section, along with any proof/ evidence in support of the application. For passing of Order (Exclusion Certificate), once an application is submitted, it shall be examined and an order (exclusion certificate) shall be passed by the concerned Commissioner-1R in the system, after such inquiries and examination of such record, as deemed necessary by him/ her.

In the event of acceptance of the application (i.e. Exclusion Certificate allowed) by the concerned Commissioner-IR, the system shall automatically restore the input tax adjustment as per law.(i) Application accepted by the concerned Commissioner-IR for the reason of “Integration with FBR’s POS system”: Restoration of input tax adjustment shall apply w.e.f. the tax period next following the tax period(s) during which the Tier-1 Retailer remained non-integrated. As already clarified by the Board, the 60% reduction in input tax adjustment (disallowance) shall apply to the tax period in which the Registered Person integrated with FBR’s system, as well as, to the prior tax period(s) during which the Registered Person remained non-integrated or remained partially integrated (i.e. not all the terminals and/or branches were integrated). Concerned Commissioner-IR, at the time of passing the order in the system shall provide the date of integration and the system shall restore the input tax adjustment accordingly.

(ii) Application accepted by the concerned Commissioner-IR for the reason “Not a Tier-1 Retailer as defined u/s 2(43A) of the Sales Tax Act. 1990”: In this scenario, the reduction in input tax adjustment (disallowance) by 60%, shall be reversed w.e.f. from the date this bar was placed on and no tax period shall remain subjected to reduction in input tax adjustment (which was originally placed u/s 8B(6) of the Sales Tax Act, 1990). (iii); Rejection of Application (i.e. Exclusion Certificate disallowed): In the event of rejection of the application, this reduction (disallowance) in input tax adjustment shall continue in all subsequent tax periods.

Copyright Business Recorder, 2022

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