Little knowledge of POS regime causes hurdles to integration of T-1Rs

LAHORE: A lack of understanding regarding penalties under Point of Sale (POS) regime on the part of tax practitioners and the appellant tribunals of Inland Revenue (ATIRs) is causing hurdles to the integration of Tier-1 Retailers (T-1Rs), sources said.

It may be noted that the ATIRs in Multan and Lahore have waived penalty for failure to integrate with the POS software on account of non-establishment of mens rea.

According to sources, the ATIR Multan was approached by one Tier-1 retailer to waive the penalty imposed by the commissioner IR Appeals for failure to integrate the POS software with the FBR. It was pointed out to the ATIR that the appellant has already been registered under the Sales Tax Act, 1990 and filing the monthly sales tax returns regularly. Therefore, the assessment was completely illegal without assessing that due to Covid-19 venders were not available to install the integration system. It was further brought to the light that the Inland Revenue officer could not pass order to impose a penalty without proper permanent legislation.

The ATIR observed that the Assessing Officer had imposed a huge penalty without taking into account that sales tax had already been paid by the appellant and that there was no justification for imposing the penalty without assessing that whether mens rea was present or not.

Similarly, the ATIR Lahore has also dismissed a punitive action on the grounds that the recovery of tax demanded was infructuous.

Meanwhile, the official sources have pointed out that the POS regime is different from the normal tax regime, as the show cause notice under the POS regime is deemed to be a demand notice. They said that the demand notice is issued after due diligence while providing an opportunity to appeal to the taxpayers. However, in case of failure to either make payment or challenge the notice, the department is authorised to withhold 60 percent input tax of the taxpayer.

It may be noted that the field formations are authorised to reduce the adjustable input tax for the whole of the tax period by 60 percent as per Sales Tax General Order 1 of 2022. It is followed by penalties, starting from Rs 500,000 up to 3 million in a short span of time and finally sealing of the business premises after 60 days of the levy of penalty.

Official sources said that the show case notice under the normal tax regime does not followed by stringent actions. However, the tax practitioners mix it up with the POS regime and challenge the show cause notices one after another. They have further feared that even the appellate tribunals, in some cases are unable to understand the difference.

Copyright Business Recorder, 2022