KARACHI: The requirements of paid-up capital and migration are the serious challenges that will hinder the implementation of vendors’ licensing and integration of Tier-1 retailers under SRO 1063 issued by FBR on August 24, 2021; a tax expert said.
According to details, the FBR has issued SRO 1063 on August 24, 2021, for integration of Tier-1 retailers and licensing in line with its vision for making the tax system automated.
The core objective of such rules is to lay down a framework for award of license for those who wish to carry out the integration of retailers thereby regulating the activity of Tier-1 retailers’ integration with FBR system and real-time reporting of retailers’ sales.
However, tax experts highlighted major issues emanating from the language couched in the rules together with practical implications which would arise as a result of its implementation.
The licensing framework announced by FBR provides that Tier- I retailers can only get their point of sales integrated through such vendors who acquires license from FBR to provide such services. However, the conditions attached to license applications, requirements of paid-up capital, and migration are some of the issues which pose a serious challenge to both the implementation, as well as, the success of such a scheme.
Ejaz Bhutta ACA, Executive Director at Moore Shekha Mufti, Chartered Accountants explained that a prime condition specified for service provider firms, who can apply for such license, is that it should be registered either with Pakistan Software Houses Association or the Institute of Chartered Accountants of Pakistan.
These conditions suggest that only chartered accountant firms and IT firms may apply for such licenses. However, another condition is that the applicant firm must have paid-up capital of above hundred million rupees, which is quite high considering the nature of business.
Ejaz further said that as CA firms did not operate under corporate structure; therefore, for CA firms the condition of paid capital needs to be relaxed. Secondly, there are very few software houses that may have paid-up capital of over a hundred million. Therefore, it can fairly be anticipated that the taxpayers would have a limited choice of vendors to work with and may not be able to negotiate the service charges.
Coming towards the system integration executed prior to issuance of SRO 1063, he contended that a large chunk of retailers have already incurred a significant cost on integration activity with its vendors and in some cases have built their in-house resources.
In all these cases, migration to FBR-approved vendors will be an additional cost for such taxpayers. Expressing his apprehensions, he said that in case FBR demands such migration, the matter could land before the Court of Law on account of the associated additional cost.
Moreover, whether the restriction imposed on the businesses to have specified infrastructure from a limited range of vendors by FBR under the Sales Tax Act, 1990 lawful is also arguable, he said and urged the FBR to address all such issues shortly to avoid confusion, misapplication, and failure of the entire scheme.
Copyright Business Recorder, 2021
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