Minimum area of shops for the tier-1 retailers should be increased to 3000 square feet from existing 1000 square feet to make the point of sale (POS) integration drive viable. Also the minimum limit of electricity bills should be enhanced to Rs 2.4 million from existing Rs 1.2 million per annum in the definition of "tier-1 retailer' under sub-section 43A of section 2 of Sales Tax Act, 1990.
According to tax experts, since almost 50% of distributors and 95% of whole sellers are not registered under the Sales Tax Act, therefore, it is not possible for these retailers to claim input adjustment against supplies from unregistered sellers. As a result, the tier-1 retailers cannot afford to pay sales tax from business resources in the absence of input adjustment.
It may be noted that the Federal Board of Revenue (FBR) has extended the registration date under the POS integration mechanism for the fourth time but to no avail, as the tier-1 retailers are reluctant to join the POS integration mechanism due to absence of a supply mechanism duly registered with the FBR. The Business Recorder had already reported the same.
Munir Ahmed, a financial expert and also dealing with the retail-related businesses, said the proposed revision in the measurement of the area would fetch more revenue for the FBR as 95% of the supplies of these retailers belong to third Schedule goods and the FBR collects sales tax in advance at the retail price besides charring an additional sales tax @ 3% on unregistered supplies under VAT mode from rest of taxable supplies.
Similarly, he added, the FBR is also collecting additional revenue from these retailers in the shape of electricity bills @7.5% under section 3(9) of the Sales Tax Act. Therefore, an increase in the size of shop and minimum electricity bill per annum would lead to economic activity and employment generation amidst the ongoing recession due to the spread of Coronavirus.
Nasir Hussain Sherazi, another tax consultant, said the FBR should start registration of the intermediate supply chains of whole distributors and whole sellers under Sales Tax Act before pursuing the tier-1 retailers for registration with POS integration. Otherwise, the whole exercise would prove futile, already evident from the available data which suggests that only 286 retailers have integrated their POS so far.
The data further reveals that all these retailers are either operating as a unit of national/international chain of stores or operating in an air-conditioned shopping plazas or malls as defined under Clause (a) and (b) of subsection 43A to section 2 of the Sales Tax Act, he added.