FTO directs FBR to address discriminatory sales tax registration

LAHORE: The Federal Tax Ombudsman (FTO) Dr Asif Mahmood Jah has directed the Federal Board of Revenue (FBR) to address discriminatory sales tax registration.

He issued these directions while disposing of a complaint filed by a business community forum regarding sales tax registration. The complainant sought deletion of retailers with single shops from the list of Tier-1 retailers required to integrate with the FBR’s Point of Sale (POS) System.

According to SRO 608(1)/2014, retailers with shop areas measuring 1000 sq ft or more fall under Tier-1 and must integrate with the FBR POS System. The complainant argued that sales tax is applicable on turnover, not area, and failed to understand the correlation between shop area and sales tax registration.

The FBR clarified that sales tax is imposed on taxable supply, not area, and Tier-1 retailers pay sales tax under the standard regime. However, stakeholders, including the Lahore Chamber of Commerce and Industry (LCCI) and Anjuman-e-Tajran, supported the complainant’s view.

The Federal Tax Ombudsman noted that while the FBR’s objective is documentation of the economy, the current measure creates a discriminatory environment. POS-integrated retailers operate under a tight regulatory regime, while non-integrated retailers enjoy a “tax haven” environment, fostering unhealthy competition and encouraging malpractices.

The Ombudsman recommended that the FBR hold exhaustive pre-budget sessions with stakeholders, including the Federation of Chambers of Commerce and Industry, to address concerns and facilitate taxpayers. This should be done without creating discrimination among stakeholders.

The complaint was disposed of accordingly, with the FBR directed to reconsider its sales tax registration criteria. The decision aims to promote a fair and equitable tax system, encouraging compliance and economic growth.

Copyright Business Recorder, 2024