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Introduction, The Federal Board of Revenue through SRO 428(I)/2024 dated March 22, 2024 has undertaken one of the most relevant steps towards improving tax compliance through real time integration of the points of sale of certain important business enterprises with the federal database.

It is of concern that such an important step has not been properly publicized.

Enterprises included in the SRO have to be compulsory integration by July 1, 2024.

Fourteen (14) categories of business enterprises have been asked to mandatorily integrate through POS systems. The enterprises to be included are relatively big or medium sized enterprises. For example only air conditioned restaurants have been included in the list.

Economic benefit & graduated approach

The real advantage of the system is not only the documentation of sale of goods and services by the business enterprises but effective and indirect identification of the person acquiring and using such services. It is advised that at the initial stage, identification of a user or a buyer is not stressed upon, as that would shy away people from the system. Once the businesses are fully integrated then buyers or consumers’ data may be analysed to broaden the tax base.

Implementation

The step taken is one of the best steps so far for the documentation and digitalization of economic transactions. However, the fundamental question is whether or not the government and its machinery has the will, capability and capacity to implement whatever has been conceived.

Time allowed is about of two months from the date of the notification for this herculean task.

It is good to note that private sector enterprises have been assigned the task to implement the work of integration. This is expected to keep the system out of bureaucratic hurdles.

Keeping in view the state and size of undocumented economy and the need for expansion of the tax base this step is essential. However, in order to achieve success professional and computer specialists have to be taken on board to effectively implement the system.

Incentive for those who integrate

There is a case of incentives for those who integrate such as immunity from Audit on manual information for a period of five (5) years

Major resistance is expected from retailers, restaurants, doctors and hospitals. However, it is to be noted that tax contributions from these sectors do not correspond to economic activity.

What is a POS system?

Income tax regulations1 require that business enterprises as identified by the government are to be ‘integrated’ with the Federal Board of Revenue’s system through electronic devices or software. These enterprises are termed ‘Integrated Enterprises’.

Meaning of ‘Integrated Enterprise’

Integration means the real-time process through which an invoice can be read and analysed by the Board’s prescribed system in a standard format. Installation of such fiscal electronic devices and software, as approved by the FBR, is to:

a. receive, record, analyse and store fiscal data;

b. format fiscal data into fiscal invoices or bills;

c. transmit the fiscal data to the Board’s computerised system through secure means; and

d. print invoice or bill.;

All the above steps are called the ‘Point of Sale’ system.

Responsibilities of the Integrated Enterprises-

The Integrated Enterprises shall:

a. make all payment counters comprising of point of sale at each outlet, available for installation of the systems;

b. be responsible for smooth functioning of point of sale;

c. report to the Board and the concerned Commissioner Inland Revenue within twenty four hours of any operational failure, damage disruptions or tampering of the system; or

d. report any inoperative point of issuance of invoice to the Commissioner Inland Revenue holding the jurisdiction.

Enforcement of POS

Through SRO 428(I)/2024 March 22, 2024 a time frame has been given for implementation, meaning thereby, that enterprises identified in the SRO are mandatorily required to integrate by July 1, 2024.

The Rule provides that:

(2) The person shall notify to the Board by July 1, 2024 through the Computerised System, of all the establishments, hereinafter referred to as notified establishments, from which they intend to carry on business and shall register each point of sale (POS) to activate the integration duly providing the following information, namely:?

The cost of integration, including the cost of equipment and fiscalization, is to be borne by the taxpayer.

The taxpayer shall prominently display at each establishment that the POS or the establishment is accredited by FBR to issue invoice or bill and that the registration number of each POS is verifiable through the Board’s verification services.

Businesses enterprises which require integrate

Through SRO 428(I)/2024 March 22, 2024, a schedule has been inserted. It has replaced earlier two schedules. In the earlier schedule these regulations were applicable only in the cities— Karachi, Lahore, Islamabad, Rawalpindi, Faisalabad, Multan, Peshawar, Gujranwala. Now it extends to whole of Pakistan.

  1. Retailers including manufacturer cum-retailer, wholesaler-cum retailer, importer-cum-retailer or such other person who combines the activity of retail sale with another business activity. If a retailer falls in any of the following categories. namely:

a. retailer operating as a unit of national or international chain of stores;

b. a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;

c. a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds rupees twelve hundred thousand;

d. a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to retailers as well as on retail basis to the general body of consumers; or

e. a retailer whose shop measures one thousand square feet in area or more.

  1. Foreign exchange dealers/Exchange Companies.

  2. Private schools, colleges, universities, professional institutes/ vocational training centres where the fee per child is more than Rs 1,000 per month.

  3. All medical service providers including dentists, physiotherapists. plastic surgeons, hair implant surgeons, and veterinary doctors where free exceeds Rs 500.

  4. Private hospitals or medical care centres providing medical consultation, hospitalisation or other ancillary services

  5. Restaurants with air conditioning facilities

  6. Hotels, motels, guest houses, marriage halls, Marquees, clubs including race clubs.

  7. Health clubs, gyms, physical fitness centres, swimming pools and multipurpose clubs such as Lahore gymkhana, Islamabad club, Chenab Club, Karachi gymkhana, Royal Palm Lahore, Polo club etc. operated by any civilian/ non-civilian administration.

  8. Inter-city travel by road with air conditioning facility.

  9. Courier services and cargo services

  10. Beauty parlours, clinics and slimming clinics, massage centres, pedicure centres with air conditioning.

  11. Pathological laboratories, medical diagnostic laboratories including X-Rays, CT Scan, M.R. Imaging etc.

  12. Photographers, videographers and event managers Where The fee charges are more than Rs 50,000 per event.

  13. Chartered Accountant or a Cost and Management Accountant

Sale through POS only

Rules provide that no sale or service from the notified establishment shall be rendered without being recorded by the duly accredited electronic fiscal device (EFD), which means a system composed of one Sale Data Controller (SDC) and at least one Point of Sale (POS)

The transactions on each point of sales in the notified establishment shall be recorded by a CCTV camera and the recording thereof shall be retained for a period of at least three months. Such recordings shall be provided to the Commissioner concerned as and when demanded and for the time as specified.

Licensed integrator

A concept of private sector licensed integrator has been introduced. A Licensed Integrator means any company or AOP having a valid licence, issued by the board to integrate Integrated Enterprise.

Audit of the License Integrator

FBR may conduct system audits of Licensed Integrator or Integrated Enterprise.

Fee and charges

The Licence Integrator shall charge a fee for configuration and integration of point of sale from the Integrated Enterprises. No fee shall be charged from any field formation or the Board.

  1. Income Tax Rules 2002. Chapter VII A Online Integration of Businesses

Copyright Business Recorder, 2024

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