Lahore High Court (LHC) has dismissed petitions of registered retailers, falling under the category of Tier-I (big retailers), against computerized integration of retail invoicing with the Federal Board of Revenue (FBR) system.
The LHC has also dismissed the viewpoint of retailers that they have been treated with discrimination under Tax Laws (Second Amendment) Ordinance 2019 whereas other retailers have reached an agreement with the Federal Board of Revenue (FBR) for not issuing sales tax invoices.
The LHC has issued an order in writ petition (146 of 2020) to dismiss the petitions filed by Tier-I category retailers.
According to the LHC, the petitioners have not brought under challenge the integration system that was already in place under various provisions of the Sales Tax Act and rules rather what has been challenged is their inclusion in the system through the changes introduced through the Tax Laws (Second Amendment) Ordinance 2019 and SRO 1203(I)/2019, which amongst others, made amendments in section 2(43A) of the Sales Tax Act and Rule 150ZEA in Chapter XIV-AA. In the absence of any challenge to the various provisions of the Sales Tax Act and the Rules dealing with the integration of the operations of certain taxpayers with the Board's computerized system, the retailers cannot be allowed to call into question the vires of the Tax Laws (Second Amendment) Ordinance 2019 and SRO 1203(I)/2019.
The reliance by the petitioners' counsel on section 73 of the Sales Tax Act and the addition of sub-section (4) therein through the Ordinance is misplaced as much as the said provision deals with the registered manufacturers which has nothing to do with Tier-I retailers. Similarly, the provisions contained in section 3(9A) of the Sales Tax Act do not put Tier-I retailers in any disadvantageous position that their other competitors.
The writ petitions call into question the vires of the Tax Laws (Second Amendment) Ordinance 2019.
The petitioners are all registered retailers and now fall under the definition of Tier-I retailers given in section 2(43A) of the Sales Tax Act as amended by the Tax Laws (Second Amendment) Ordinance 2019. Through SRO 1203(I)/2019, inter alia, the provisions of Rule 150ZEA of the Sales Tax Rules 2006 have been amended to make them applicable to Tier-I retailers for their online integration with the FBR. The Section 2(43A) (c) of the Sales Tax Act has been amended through the ordinance and the retailers whose cumulative electricity bills during the previous year exceed Rs 1,200,000 has been included in the definition of Tier-I retailer. Similarly, certain penalties for retailers who avoided monitoring, tracking or reporting or recording of their transactions under the integrated system have been imposed through amendments made in section 33 of the Sales Tax Act.
The grievance raised by the petitioners is that they are being treated with discrimination under the Tax Laws (Second Amendment) Ordinance 2019 and SRO 1203(I)/2019. The petitioners had an option under section 3(9A) read with section 8 of the Sales Tax Act and as they such could not be penalized through the penalties envisaged under the amendments made in section 33 of the Sales Tax Act. Under an agreement that other traders not falling in the definition of Tier-I retailers had with the FBR whereby the said traders were exempt from issuing sales tax invoices would result in the petitioners selling their goods at higher rates including 14 percent sales tax.
The LHC observed that it is evident that the structure for online integration of certain registered persons with the Board's computerized system through the Sales Tax Act and the rules was already in place. Through the Ordinance and SRO1203, all Tier-I retailers were also made part of this system. The legislature and the Board have thus carved out specific specie of retailers for integration of their retail outlets with Board's computerized system for real-time reporting of sales. By way of incentives, these retailers are being charged reduced rate of sales tax.
Now, a legislative instrument can only be challenged on the grounds that the legislative promulgating it did not have the capacity or competence to do so and that it violates the fundamentals rights guarantees by the Constitution. Similarly, the sub-delegated legislation can be struck down by the courts if it is in violations of some provision of the parent statute and has been issued in violations of the statutory procedures.
The Tax Laws (Second Amendment) Ordinance 2019 and SRO 203(I)/2019 did not bring about any change in the existing structure envisaged by the Sales Tax Act or the Rules for integration of certain taxpayers with Board computerized system. The existing structure of the Sales Tax Act for integration of the operations of the retailers and other taxpayers does not violate Article 25 of the Constitution as it carves out a special class of persons and this classification is based on intelligible differentia, the LHC added.
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