The Federal Board of Revenue (FBR) is gathering sales data from the retail outlets and wholesalers through credit cards facility to match declarations made in sales tax returns with actual sales during a tax period for increasing sales tax collection.
It was learnt here on Friday that some banks are reluctant to provide information to the Regional Tax Offices (RTOs) about retailers and wholesalers providing credit/visa cards facility to their customers. The main purpose of the exercise is to check skipping of sales by registered retail outlets and wholesalers where facility of making payments through credit cards is available.
It has been brought to the knowledge of the FBR that sales tax has not been deducted on payments made through the credit/visa cards and the same sales had not been reflected in the monthly sales tax returns filed by the retailers and wholesalers. Most of such registered outlets have been involved in suppression of sales to avoid actual payment of sales tax.
The exercise has covered only those big retail outlets where annual turnover is above the registration threshold of Rs 5 million. The cross checking of data would enable the department to know whether the sales tax registered unit had declared the sales made through the credit cards and deducted the sales tax on such transactions or not. Interestingly, the sales tax department would also check whether only cash sales have been declared or sales through credit cards have also been specified in the monthly sales tax returns.
Sources said that the information about sales through credit cards would also be matched with the information being provided in the income tax returns to be filed next year. The data-matching exercise would also help in determining the actual sales as compared to the declared sales in the income tax returns.
In this regard, the RTOs have requested the banks to provide information about retailers/wholesalers under section 176 of the Income Tax Ordinance. According to one of such letters issued to a bank, it has been requested that information regarding persons as per list enclosed, where payments have been made through the facility of credit/visa cards, may be provided to the RTO.
Another letter issued to a bank by another RTO says, "You are requested to provide information relating to the transactions routed through debit/credit cards in respect of those leading retail outlets, who have the facility of sale on credit/debit card. The information is being required/requested under section 38A of the Sales Tax Act, 1990 and section 176 of the Income Tax Ordinance 2001."
Sources said that certain banks are reluctant to provide this information. The tax department has claimed that the Income Tax Ordinance has overriding effect on other laws, whereas the banks contested that information of accounts cannot be shared with the third party under section 33A of the Banking Companies Ordinance, 1962 and Protection of Economic Reforms Act, 1992.
The tax department is of the view that section 33A of the Banking Companies Ordinance 1962 does not allow divulging information to any person. In this regard it is clarified that income tax law overrides all other laws for the time being in force as per section 3 of the Income Tax Ordinance 2001. Under thw provisions of Section 33A of the Banking Companies Ordinance, 1962, information about the accounts cannot be divulged to a third party unless expressly required by law.
Moreover, under the Protection of Economic Reforms Act, 1992 information about bona fide transactions cannot be given to third party. It has also been informed by some banks that FBR has also accepted this position and issued Circular 134 of 1991 and letter C.No F-144(I) ITP/96 giving directions/instructions that information about an account holder can only be given if asked specifically. No general information can been given, sources added.
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