FBR directed to immediately stop sealing Tier-1 retail outlets

LAHORE: In a landmark decision, the Federal Tax Ombudsman (FTO) has ruled in favour of Pakistan’s formal retail sector, directing the Federal Board of Revenue (FBR) to immediately stop sealing Tier-1retail outlets and address critical technical flaws in the Point of Sale (POS) system. The verdict comes as a major relief for retailers who have long struggled with systemic inefficiencies, excessive costs, and abrupt enforcement actions.

The ruling was issued in response to a complaint filed by the Chainstore Association of Pakistan (CAP), which highlighted persistent issues such as POS system failures, exorbitant integration costs, unjustified profile disconnections, missing invoice uploads, and poor coordination between the FBR and its automation wing, the Pakistan Revenue Automation Limited (PRAL).

According to the details the FTO has ordered the FBR to suspend the sealing of Tier-I retail stores until all technical issues in the POS system are fully resolved.

The FBR has been instructed to consult CAP on future POS-related glitches and enforcement strategies to ensure smoother compliance and dispute resolution.

The FTO criticized the lack of technical expertise among FBR officers, urging enhanced training and coordination with PRAL to address system-level failures.

FTO directed that FBR must develop a forewarning mechanism to alert retailers about POS disconnections, token expirations, or system shutdowns to prevent sudden disruptions.

Security tokens for POS systems should now remain valid for at least five years, with prior notice to retailers before expiration.

Acknowledging a long-standing demand, the FBR has submitted a Change Request Form (CRF) to introduce a bulk download feature for POS data, which the FTO has stressed that it must be implemented urgently.

The ruling confirmed frequent synchronization failures between retailer invoices and FBR servers, as well as “fake disconnection” errors. The FTO has directed the FBR to resolve these issues technically and administratively.

Responding to complaints about third-party integrators charging up to Rs10 per invoice or Rs1 million annually, the FBR stated that PRAL’s integration services would now be free under SRO 69(I)/2025. The FTO has recommended quarterly meetings between the FBR, CAP, and other stakeholders to monitor POS performance and address grievances in real time.

The decision is expected to alleviate significant operational and financial burdens on thousands of Tier-I retailers who had voluntarily integrated with the FBR’s POS system but faced undue harassment due to technical and administrative shortcomings.

The FTO emphasized that resolving these issues is crucial for improving tax compliance and advancing Pakistan’s retail documentation efforts. Retail industry leaders have welcomed the ruling, calling it a step toward fairer enforcement and a more business-friendly tax regime.

Copyright Business Recorder, 2025