To avoid disallowance of input tax claims and the establishment of tax demands, the Federal Board of Revenue (FBR) has mandated 482 identified Tier-I Retailers (large retailers) to integrate with the FBR’s Point of Sale (POS) system by December 10, 2021.

On Friday, December 3, 2021, the FBR issued Sales Tax General Order No. 6 of 2021. According to the FBR, the Finance Act of 2019 added sub-section (6) to section 811 of the Sales Tax Act of 1990 (“the STA, 1990”), which states that if a Tier-1 Retailer “(T-IR)” does not integrate its retail outlet in the manner prescribed in sub-section (9A) of section 3 of the STA, 1990 during a tax period, its adjustable tax for that period would be reduced by 15%. The figure of 15% has been increased to 60% by the Finance Act of 2021.

POS integration: A list of 608 Tier-1 retailers has now been released

To put this important provision of law into action, a system-based approach has been adopted in which all T-1Rs who are liable to integrate but have not yet integrated, with effect from July-2021 (Sales Tax Returns filed in August 2021), are to be dealt with under the procedure outlined in STGO No 1 of 2022 issued on August 3, 2021.

According to the current Sales Tax General Order, a list of 482 identified T-1Rs has been placed on the FBR’s web portal at www.fbr.gov.pk, allowing them to integrate with the FBR’s system by December 10, 2021, and the procedure for exclusion from this list of 482 identified T-1Rs shall apply as laid out in paragraph 2 of STGO 1 of 2022 dated 03.8.2021.

The FBR emphasized that upon filing a sales tax return for November 2021 for all hereby notified T-1Rs that have not yet integrated, their input tax claim will be refused as described above, without any further notice or proceedings, resulting in a tax demand of the same amount.