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Retailer sector registration: Ex-FBR adviser’s findings offer solution

Retailer sector registration: Ex-FBR adviser’s findings offer solution

ISLAMABAD: The findings of former adviser to Federal Board of Revenue chairman can prove to be guidepost for the task force constituted by the FBR chairman to bring retail sector into tax net

The former adviser, in a special report on retailers, have recommended reduction in registration threshold from Rs5 million to Rs2.5 million for retail sector.

As per details, FBR Chairman Tariq Bajwa has constituted a task force to propose a concrete policy along with enforcement measures to bring the retail sector into tax net and ensure that the retailers make due contribution to revenue. Under the chairmanship of Yasmin Saud, Member Human Resource Management (HRM), Members of the Task Force included Chief Commissioner/Commissioner of few Regional Tax Offices (RTOs).

Experts said the task force can benefit from the special report on retailers prepared by former FBR Advisor to the FBR chairman Abdul Wadood Khan in 2009. The viable suggestions of the report can be analysed by the existing Task Force for improving tax collection from the retail outlets. The past report on retailers has addressed a number of key issues including tax evasion by retailers and measures to increase registration of the retail outlets.

Currently, the task force is in the process of drafting proposals and enforcement measures to bring retail sector into the tax net and Wadood’s past report on retailers can certainly benefit the FBR for achieving the desired objectives.

According to the findings of Wadood Khan, the retail sector has been brought under the sales tax net by promulgating special procedure through SRO 480(1)/2007 dated June 7, 2007. These rules shall apply to the registered persons, including jewellers, who make supplies from retail outlets to final consumers. However, the special procedures shall not be applicable to dealers of motorcycles and specified electric goods who shall pay sales tax as prescribed in Chapter VIII & XIII of Sales Tax Special Procedure Rules circulated vide SRO 480(1)/2007 dated 9th June, 2007.

In 2009, the levy and rate of tax in the special procedure revealed that quarterly turnover of 1.25million would be subject to nil sales tax; quarterly turnover more than Rs1.25 million and up to Rs2.50 million, the sales tax would be 0.5 percent of turnover, which is in excess of Rs1.25 million and where quarterly turnover is more than Rs2.5 million, sales tax rate would be Rs6,250 plus 0.75 percent of turnover which is in excess of Rs 2.5 million.

These figures reflect that for the year 2007-08 out of 4,414 registered retailers 2,590 are the retailers which are either nil filers or non-filers. Hence the presently taxpaying retailers are only 1,824 and for year 2008-09, the registered retailers were 5614 out of which 3912 retailers were either nil filers or non-filers hence the actual taxpaying retailers stand only at 1702. These figures show a dismal picture and lack of controls and monitoring.

It would not be out of place to mention here that the big super stores are concealing their sales and they are keeping multiple credit cards machines for this purpose. This happens due to weak enforcement and lack of proper monitoring. In the light of the above-stated legal facts it is suggested that the retailers should be brought under the VAT mode instead of special procedure besides the turnover limit for payment of sales tax through VAT mode by the retailers may be reduced from exceeding Rs5 million to Rs 2.5 million.