KARACHI: Lack of comprehensive consultation, technological and digital literacy gaps, difficulty in determining the fair market value of business premises, and lack of clarity around the formula for calculating indicative income are the major challenges in the successful implementation of Tajir Dost Scheme (TDS).

These views were expressed by the speakers at a seminar on TDS and countering fake invoices organised by the Karachi Tax Bar Association (KTBA) at the Bar Chamber here on Thursday.

During his presentation, Zeeshan Merchant, former president KTBA said that TDS, which is a special procedure, announced by the Federal Board of Revenue (FBR) to facilitate small traders and shopkeepers, aims to simplify tax procedures and provide incentives to encourage compliance and formalise the informal sector.

He said that the TDS applies to traders and shopkeepers operating through a fixed place of business in specified cities in Pakistan, with certain exclusions like companies and national/international chain stores.

He said that TDS includes mandatory registration in a National Business Registry, a requirement to pay monthly advance tax which will be the minimum tax, and a formula-based “indicative income” calculation.

However, he also highlighted several challenges and issues with the scheme, such as lack of comprehensive consultation, technological and digital literacy gaps, difficulty in determining the fair market value of business premises, and lack of clarity around the formula for calculating indicative income.

Meanwhile, Muhammad Tarique, senior manager, of Moore Shekha Mufti discussed recent amendments made to the Sales Tax Rules, 2006 through SRO 350(I)/2024.

These amendments were introduced to counter the issue of fake and flying invoices, which have resulted in significant sales tax evasion estimated at PKR 5-6 trillion. The amendments cover areas like registration requirements, restrictions on the issuance of credit notes to unregistered persons, and the introduction of a “provisional sales tax return” concept.

He also informed the participants about the statistics related to the sales tax registration landscape in Pakistan, with individual, AOP, and single-member companies comprising a majority of the registered persons, but contributing only around 7% of the total sales tax collection. He highlighted the need for stronger measures to address the challenge of fraudulent activities and sales tax evasion.

Copyright Business Recorder, 2024