ISLAMABAD: The Taskforce set up by the Federal Board of Revenue (FBR) to rope in retail sector into tax net has submitted its recommendations after evaluating potential of the sector.
The taskforce, being headed by FBR Member HRM Yasmin Saud, proposed flat tax rate on the basis of geographical location and covered area of the commercial establishments and retail outlets.
The taskforce is comprised of Chief Commissioner Amir Ali Khan Talpur, Commissioner Nadir Mumtaz Warriach, Commissioner Asim Ahmad, Commissioner Dr Faiz Illahi Memon and Additional Commissioner Abdul Hameed Memon. The taskforce has proposed that every withholding agent, making taxable supplies to retailers, should be bound to obtain name and CNIC/NTN from the buyer and provide to tax authorities. They also proposed strict enforcement of tax laws to document the retailers.
The taskforce maintained that all commercial connections of electricity and gas may be tagged with NTNs in collaboration with the electricity and gas distribution companies to ensure access to utility payments of the consumers. Secondly, the withholding Income Tax rates under section 235 of the Income Tax Ordinance to be enhanced for un-registered commercial consumers running business.
It was suggested that manufacturers paying Rs0.7 million or more as utility bills, should be declared liable for registration and charged under Sales Tax Act while, the retailers paying utility bills above threshold of Rs200,000 per annum may also be obliged to be registered and charged Sales Tax Act.
The taskforce suggested that withholding regime under section 234A of Sales Tax Act may be extended to unregistered commercial consumers, the FBR should introduce a simplified income tax return for retailers and NTN should be made mandatory for getting a commercial electricity connection.
The taskforce suggestions also envisaged that survey of pre-identified markets supported with massive publicity of enforcement measures be taken by the FBR and a permanent cell comprising IT Wing and Chief Commissioners for generation of reports of un-enrolled potential taxpayers be set up. There is also required automation back-up for enforcement initiatives.
Alternative approach of flat rate on the basis geographical location and covered area of the commercial establishment is worth considering with benefits of guaranteed revenues and little expected resistance from the taxpayers.
