Doing business of Rs 7.5 million annual turnover: VAT rules to empower FBR to compulsorily register traders

The proposed Value Added Tax (VAT) Rules would empower Federal Board of Revenue (FBR) to compulsorily register any person including retailer, wholesaler and dealer having annual turnover of Rs 7.5 million. Sources told Business Recorder on Thursday that the VAT law as such does not differentiate between retailer/retail dealer and wholesaler/dealer.
Nor it defines product or manufacturer. Everyone , no matter what business category, would need to get VAT registration if engaged in carrying out an economic activity of making supplies of taxable goods and services. The FBR has explained VAT related procedures in the 'questions-answers' pamphlets, issued to clarify the basic concepts of the VAT to the general public.
FBR said that liable persons would be compulsorily registered under section 43 of the Federal VAT Bill, 2010. The procedure for compulsory registration on objective lines shall be given in the VAT Rules. The procedure for cancellation of VAT registration is given in sections 46 and 47 of the Federal VAT Bill, 2010.
The VAT registration can be cancelled in the following events: where a registered person ceases to make taxable supplies; where a person is no longer required to be registered (eg falling below registration threshold); where the supplies made by a registered person otherwise gets exemption from VAT despite that a person continues making such exempted supplies.
However, a person who is making taxable as well as exempted supplies is required to be registered and where a person has failed to comply with the VAT obligations or is otherwise not entitled to be registered. According to FBR, the VAT refunds will be paid through Expeditious Refund Payment System. This system has already been installed for industrial exporters from the tax period April, 2010 onwards.
This system will be upgraded to make electronic refund payments directly in the bank accounts of the taxpayers. The scope of this new refund system will be expanded to cover all other categories of refund claimants in due course. The FBR said that the actual concept is input tax adjustment, ie to work out net tax liability, and the amount of tax paid on the purchases is deducted from the amount of tax charged on sales of taxable goods or services.
This is also known as tax credit. Sections 25 to 34 of the Federal VAT Bill, 2010 relate to adjustments under different circumstances. On its website, FBR will, as required under section 48 of the Federal VAT Bill, 2010, regularly maintain an updated list of active registered persons under VAT regime. Such information is even currently available under sales tax regime.
About zero rating, the FBR said, where supplies are exported or zero-rated in terms of section 12 of the Federal VAT Bill 2010. If the part of any adjustable input tax amount remains, gets carried forward without being deducted against any output tax as laid down in section 37(3) of the Bill. The procedures for all categories of VAT refund shall be prescribed in VAT Rules.