ISLAMABAD: A leading traders’ association has warned the Federal Board of Revenue (FBR) that any new fixed tax scheme without consultation of traders and retailers would be outrightly rejected and result in countrywide agitation against the tax machinery.
Ajmal Baloch, President of All Pakistan Anjuman-i-Tajiran told Business Recorder that the FBR is considering different proposals to introduce a fixed tax scheme for retailers. However, the FBR has not included traders’ associations during the consultative process which is unacceptable.
“If the FBR is drafting any scheme, it should immediately consult all leading trade bodies,” he said.
ST through power bills: Only 0.133m retailers file tax returns
The caretaker government is not legally required to promulgate an ordinance for issuing a new scheme for shopkeepers and retailers. Under the income tax law, the federal government or the board with the approval of the Minister in-charge pursuant to the approval of the Economic Coordination Committee of the Cabinet may, issue an income tax general order to issue a fixed tax scheme for the retailers.
Baloch said that the scheme must be chalked out in consultation with all leading trade and
retail bodies. So far, the FBR has not invited any traders or retailers bodies to have input on any new scheme.
There is no relevance of any scheme which is shared with the traders at the time of its notification, the president All Pakistan Anjuman-i-Tajiran regretted.
Traders would not accept any scheme which would be unilaterally drafted without the consultation of the traders’ bodies.
In the past, all such attempts of the FBR have failed which were undertaken without taking into confidence the retail bodies and associations, Baloch added.
The president All Pakistan Anjuman-i-Tajiran warned that the FBR should not forget past agitation in front of the FBR House. He also referred to the country-wide shutter-down strike done in the past.
The FBR is examining a proposal to impose a fixed tax (Rs 1,000-Rs 5,000 per month) on shopkeepers and retailers. The tax collection from small traders and shopkeepers via electricity bills would be replaced with fixed schemes.
Under the proposed scheme, it is under consideration to impose Rs 1,000 on shop size of 100 square feet, Rs 3,000 on shop size of 200 to 300 square feet, and Rs 5,000 on 500 square feet in urban areas. For rural areas outside the jurisdiction of municipal committees, the proposal is to charge a fixed rate of Rs 1,000 on each shop.
When contacted, a tax expert informed that only 0.133 million retailers filed their income tax returns out of 2.3 million retailers who paid sales tax of Rs 6 billion during 2021-22 under the fixed sales tax scheme through electricity bills. The estimated new returns from the retail sector are 700,000 and estimated revenue collection at Rs 42 billion.
The tax experts said that the traders were facing issues during the fixed sales tax scheme through electricity bills. The tax rates were generated by the computer systems and resultantly, the incidence of the tax has been increased on the trader due to the sales tax charged on the basis of power consumption.
The data of the power distribution companies (Discos) was not updated and creating serious problems for the traders and shopkeepers. Moreover, the power distribution data was not in the name of the current users of electricity. The concept of differential taxation was introduced and tax amount was doubled for non-filers. Traders agitated due to the double taxation from non-filers as the electricity meters were not directly in the names of these traders. The fixed monthly tax was Rs 3,000 for filers and Rs 6,000 fixed tax per month for non-filers.
Later, a new income tax section was replaced with the earlier provision enabling the federal government to levy tax on retailers through the electricity bills at the rates to be specified in the income tax circular. At the same time, a new provision in the Sales Tax Act was inserted that empowers the federal government to levy and collect sales tax through electricity bills from retailers (other than Tier-I big retailers).
Under the Finance Act 2022, in order to collect income tax from certain retailers and specified service providers a special fixed tax regime was introduced through insertion of Section 99A of the Income Tax Ordinance.
The retailers, other than Tier-I retailers as defined in Sales Tax Act, 1990, and specified service providers were required to pay fixed income tax through their commercial electricity bills.
Copyright Business Recorder, 2023
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