The Federal Tax Ombudsman (FTO) has discovered many flaws in the Federal Board of Revenue’s (FBR) new point-of-sale (PoS) system.
According to a special report by the FTO on the PoS scheme, the FBR’s field formations are even enrolling persons/shops that do not fit into any of the categories specified, and after non-voluntarily registering them, they issue demand notifications and penalties for non-filing.
When addressed by field formations, the position indicated that the FBR has been handing them names of people/businesses based on the income reported on their tax forms. They send letters to the people on the lists, and if they don’t respond, they have to register under the sales tax legislation.
Due to capacity limitations in FBR’s IT setup, the National Sales Tax Return (NSTR) portal was complicated and inaccurate, causing disruptions in business operations and an unsustainable backlog of commercial risks not only for small and medium-sized chain stores with limited resources, but also for large enterprises with sufficient resources, according to the report.
The FTO was also informed that categorizing some merchants as Tier-1 while leaving other categories of retailers out of the scope of PoS integration would create an exceedingly discriminating environment, inhibiting retailers from integrating with the system.
Buyers are also opting to visit non-integrated locations to avoid paying the 17 percent Sales Tax, which is harming the integrated businesses’ turnover volume.
There have been concerns regarding shops that do not fit into any of Section 2(43)A through F categories delaying exclusion. Despite the informed Tier-1 Retailer’s assertions and applications that they are not liable to be notified, FBR commenced proceedings against the taxpayers while the request for an exclusion certificate was waiting with the department for months.
The rule did not exclude even low-turnover stores from inclusion in the STGO lists because they were located in a mall, therefore the tiny shops in malls were registered arbitrarily. Many of the complainants did not have a retail location and only sold to registered people on a wholesale basis.