ST registration under RGST: documentation tied to removal of Rs five million threshold

The documentation under the Reformed General Sales Tax (RGST) is only possible after removal of the existing sales tax registration threshold of Rs 5 million for bringing entire supply chain particularly wholesalers, dealers and retailers into the GST net.
A leading tax analyst Syed Naveed Andrabi told Business Recorder here on Monday that if the FBR retains some registration threshold, it would limit the documentation drive of the Board under the RGST. If the purpose is to encourage documentation of economy then the basic threshold of taxation has to be done away with rather enhanced. The RGST has proposed to increase the minimum threshold from Rs 5 million to Rs 7.5 million. This limit is always abused as small & medium business men do not show more sales to be liable for registration.
It has also been observed that the businesses have been split into multiple businesses to avoid registration under the sales tax. The increase in basic threshold will encourage traders to take more sales out of the net rather than making them eligible for bringing into the net. It is apprehended that the increase in the registration threshold may give an opportunity to different retailers, wholesalers and dealers to avoid registration under the cover of increased threshold of Rs 7.5 million.
The paradigm shift from present sales tax system to Reformed GST is only for one reason that this will increase the documentation of the economy. The authors of RGST are of the view that documentation of economy will automatically take place if more and more people/sectors are brought into the sales tax net. This is just a reason or alibi and has nothing to do with the documentation of economy, he added.