At a time when the Federal Board of Revenue (FBR) admitted that retailers could not be brought into tax net without provinces' help, the Regional Tax Office (RTO), Rawalpindi, made a huge effort and compulsorily registered leading retailers with the sales tax department and recovered a huge amount of sales tax.
Sources told Business Recorder on Sunday that the Tax Facilitation Centre of Jhelum under the RTO Rawalpindi is making efforts to register retailers. Nearly 30 major retailers in the area were issued notices for compulsory registration with the sales tax department.
In a small city like Jhelum, dozens of retailers engaged in the business of sports, cloth/fabrics, general stories and big retail outlets having annual turnover of at least Rs10 million. The TFCs could play an important role in documentation of retailers as was evident from a major case detected in a far-flung area such as Jhelum.
Under the guidance of Chief Commissioner Inland Revenue (IR) RTO, Rawalpindi, Shahid Anawar Khan and Commissioner IR Zone-1 RTO, Rawalpindi, Abdul Hafeez, action was taken under Section 40-B of the Sales Tax Act, 1990 by TFC Jhelum against a cloth retailer - the biggest in Jhelum district.
The owner of that cloth shop agreed to deposit sales tax on retail sales and also admitted his annual sales were nearly Rs60 million. He has already shown his total annual sales to be around Rs4 million for the tax year 2011. The retailer has deposited huge amount of sales tax under Special Procedure for Retailers of 2006.
If this exercise is replicated in other cities like Lahore and Faisalabad, the retail sector could be gradually brought into the formal regime.
Under Section 40-B, actual sales, purchases and stocks are being monitored. This is a general practice that every retailer tries to show his sales below Rs5 million to avoid sales tax. Retailer also shows his stocks to be between Rs400,000 and Rs600,000 whereas more than there is a stock of at least Rs10 million in every big shop.
It is the need of hour to educate taxpayers particularly retailers / shopkeepers that retail sales tax rate is only 0.75 percent, instead of the standard sales tax rate of 16 percent.