ISLAMABAD: The Federal Board of Revenue (FBR) has issued procedure to restore input tax adjustment claimed by Tier-1 retailers.
The FBR issued Sales Tax General Order (STGO) No. 17 of 2022 dated May 13, 2022 regarding Tier-1 retailers – integration with FBR POS System.
The procedure for reversal of bar on input tax adjustment by 60 per cent (i.e. the exclusion), as provided for in STGO No. 1 of 2022 dated August 3, 2022 has been automated. The STGO No. 1 has now been amended to the extent of reversal of bar on input tax adjustment by 60 per cent / issuance of exclusion certificates.
The FBR said a registered person whose adjustable input tax has been reduced by 60 per cent under Section 8B(6) of the Sales Tax Act, 1990, by inclusion in STGO shall file application for removal of this bar / for restoration of input tax adjustment. Application shall be filed through the system (IRIS) by selecting the relevant reason for the exclusion from the purview of the said section, along with any proof / evidence in support of the application.
Once an application is submitted, the FBR said, adding that it shall be examined and an order (exclusion certificate) shall be passed by the concerned commissioner IR in the system, after such inquiries and examination of such record, as deemed necessary by him/her, as under:
A. Acceptance of application (i.e. Exclusion Certificate allowed):
In the event of acceptance of the application (i.e. exclusion certificate allowed) by the concerned commissioner IR, the system shall automatically restore the input tax adjustment as per law as under:
i. Application accepted by the concerned commissioner IR for the reason of ‘integration with FBR’s POS system’: Restoration of input tax adjustment shall apply with effect from the tax period next following the tax period(s) during which the Tier-1 Retailer remained non-integrated. As already clarified by the Board, the 60 per cent reduction in input tax adjustment (disallowance) shall apply to the tax period in which the Registered Person integrated with FBR’s system, as well as, to the prior tax period(s) during which the registered person remained non-integrated or remained partially integrated (i.e. not all the terminals and / or branches were integrated).
Concerned Commissioner – IR, at the time of passing the order in the system shall provide the date of integration and the system shall restore the input tax adjustment accordingly, as above.
ii. Application accepted by the concerned Commissioner-IR for the reason ‘Not a Tier-1 Retailer as defined under Section 2(43A) of the Sales Tax Act, 1990: In this scenario the reduction in input tax adjustment (disallowance) by 60 per cent, shall be reversed with effect from the date this bar was placed on and no tax period shall remain subjected to reduction in input tax adjustment (which was originally placed under section 8B(6) of the Sales Tax Act, 1990).
B. Rejection of Application (i.e. Exclusion Certificate disallowed): In the event of rejection of the application, this reduction (disallowance) in input tax adjustment shall continue in all subsequent tax period(s) as before,
The FBR said the procedure of automation in the hands of concerned commissioner-IR will be effective from May 10, 2022 and cases for restoration of 60 per cent reduction (disallowance) of input tax adjustment (excluded cases) as already communicated to PRAL by the Board, shall be managed/implemented in the system by PRAL.