Important Sub-topics to cover (list of tier retailers who are liable to file taxes, types of notices, why is it important to register your point of sale with FBR).
Managing your sales tax [ST] responsibilities and staying compliant can be a daunting task. The law amendments are being observed from time to time. This brings complications for taxpayers to handle their tax compliances.
This blog is prepared as a general guide for the benefit of our readers/clients and other interested persons to understand the basic concept of sales tax with respect to Tier-1 retailers [T-1R]. Whether you are new to the threshold of T-1R, this guide can help you stay compliant as your business grows. Tax Home keeps its readers updated regarding each and every activity related to taxes and allied matters.
What is Sales Tax?
Sales Tax is basically an indirect tax charged by the sellers on the supply of goods and services and ultimately borne by the end consumers. Wherein, the sellers collect sales tax and deposit it in Government Treasury and act as ‘agent’/’intermediary’ to the Government under Section 3 of the Sales Tax Act 1990 [the Act] – the charging section. In other words, it is a “consumption tax” because it’s only charged when a buyer buys goods or services.
Every person making taxable supplies is required to charge sales tax while making supplies/sales to customers including Tier -1 retailers. A viable practice to manage your tax is available with Tax Home.
Tier-1 Retailer [T-1R]
The term ‘Tier-1 retailer’ [T-1R] was introduced through Finance Act, 2017 under Section 2(43A) of the Sales Tax Act, 1990. A Tier-1 Retailer means a retailer falling in any one or more of the following categories, namely: –
- a retailer operating as a unit of a national or international chain of stores;
- a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;
- a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand;
- a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on a wholesale basis to the retailers as well as on retail basis to the general body of the consumers”;
- a retailer, whose shop measures one thousand square feet in area or more or two thousand square feet in area or more in the case of a retailer of furniture
- a retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by the State Bank of Pakistan; and
- any other person or class of persons as prescribed by the Federal Board of Revenue [FBR].
Tax on T-1R is charged under the normal Value Addition Tax [VAT] regime and is also required to be integrated with the FBR online real-time Point of Sales (POSs) system. The purpose was to integrate their POSs with a computerized system of the FBR to keep an evident eye on their business sales, inventory, finance, accounts and other business operations.
Read More: Why Should Every Business Hire Bookkeeping Services
This integrated system is not only valuable for the government but also significant for the T-1R by complying with Sales Tax General Order (STGO) No.17 of 2022 read with STGO No 1 and No.9 of 2022 wherein, the retailers enjoy the tax benefit of adjusting input tax with their output tax under section 8B of the Act. However, non-compliance with this order will result in a reduction in input tax adjustment (i.e., disallowance) by 60 percent.
Besides, the integration assists a T-1R to upload sale invoices and credit notes automatically to the FBR servers which curtails the expenditure cost of taxation services by automatic preparation of the Sales Tax Return for local Tier-1 retailers. Further, in order to verify whether the tax is deposited or not, it is made easy with integration. This system accurately reports T-1Rs’ sales revenue to the FBR which enhances business credibility.
Further, our next blog will have a detailed explanation of penal sections. Keep following us to continue learning valuable information.
