New tax policy for retailers likely

The Federal Board of Revenue (FBR) is likely to change taxation policy for retailers to broaden the tax base and improve revenue collection from this major non-compliant sector during 2008-2009. It is learnt on Thursday that the board is seriously considering implementing some effective measures for increasing total number of registered retailers with the sales tax and income tax departments.
The change in sales tax and income tax policy would be needed to improve compliance by the retail sector. In this connection, the coming board-council meeting of the FBR would discuss the proposal to change tax policy for retailers.
In budget 2007-2008, retailers had agreed to pay the nominal amount of tax with the promise to increase the number of income tax filers within the retail sector. In consultation with the retailers from all the four provinces, the board had issued a lucrative scheme for retailers and traders to increase income tax and sales tax collection. Since July 1, 2007 there was a nominal response of retailers to the scheme, which was designed on recommendations of All Pakistan Traders Association (APTA).
About the sales tax position, sources said that the FBR has also directed the Sales Tax Wing to change the policy for levying sales tax on the retail sector. The non-compliance is visible by the registered persons, including jewellers, who make supplies from retail outlets to final consumers.
The retailers have to pay sales tax on the basis of their turnover. In case, the quarterly turnover is more than Rs 1.25 million and up to Rs 2.50 million, 0.5 per cent sales tax of turnover which is in excess of Rs 1.25 million has to be paid by the retailers.
If the quarterly turnover is more than Rs 2.5 million, Rs 6,250 plus 0.75 per cent of turnover which is in excess of Rs 2.5 million has to be paid as sales tax. Within the retail sector, one of the major sales tax contributors is Utility Stores Corporation. The newly established international chain stores have declared excessive input tax. Thus, these branded international retail outlets are not contributing any significant amount towards the national kitty.
As far as local retailers are concerned, these are paying meager amount of sales tax mostly non-complying with the instructions. Only 30,000 retailers and wholesalers had filed sales tax returns and deposited Rs 101 million in 2007.