Tier-1 retailers unhappy with direct imposition of ‘highest’ penalty

LAHORE: The Tier-1 Retailers (T-1Rs) are offended with direct imposition of the highest degree of penalty by the field formations of the Federal Board of Revenue (FBR) while ignoring prerequisites of recovery proceedings in accordance with law i.e., Sales Tax Act, 1990.

While requesting anonymity, they said, most of the recovery proceedings against T-1Rs are illegal because the department fails to carry them out as the law requires to be done.

They said taxpayers are deprived of the procedural safeguards by the department simply to collect revenue by hook or by crook. The department also ignores pending proceedings before the relevant forums on the determination of whether a taxpayer is liable to be registered as a Tier-1 retailer or not, they added.

Instead, some of them said, the field formations issue show cause notices and impose the highest degree of penalty without finalizing whether a taxpayer falls under the definition of Tier-1 retailer or not. So much so, the department also proceeds with sealing the business premises after a period of two months without realizing the illegality committed by it at the very outset of penal proceedings, they stressed.

A tier-1 retailer is defined as a retailer operating as a unit of a national or international chain of stores, carrying out his business activity in an air-conditioned shopping mall, plaza, or centre (excluding kiosks), with electricity bill exceeding Rs1.2 million per annum, and included a wholesaler-cum-retailer engaged in bulk import and supply of consumer goods and also a retailer whose shop measures 1000 square feet in area and any other person or class of persons as prescribed by the Board.

However, according to sources, no necessary proceedings are carried out before rendering any retailer liable to penal consequences they said and added that it is a precondition to determine whether a particular retailer squarely falls within the definition of Tier-1 retailer or not, followed by his registration and rest of the proceedings.

Sources from among the tax practitioners have pointed out that it is imperative to note that the field formations ignore the provisions related to the reduced input tax rate.

They said the tax authorities prefer to jump to the option of imposing a heavy penalty to harass the retailer instead of issuing a show cause notice to make an order for assessment of tax.

In most cases, tax authorities impose the highest penalty followed by the rest of the recovery proceedings to integrate him with the Board under T-1Rs arrangements, they deplored.

However, sources from the local field formation have pointed out that retailers try to hide behind legal protections to delay their integration, as they challenge the process related to integration at the very early stage and start abstaining from pursuing it at the appellate forum, which leads to penal action against them.

Copyright Business Recorder, 2023