FBR Clarifies Tier-1 Retailer Definition and Enforces POS System Integration

The Federal Board of Revenue (FBR) of Pakistan has issued two key notifications aimed at streamlining the registration and integration of Tier-1 Retailers with the FBR’s Point-of-Sale (POS) system.

Notification 1: Defining Tier-1 Retailers (S.R.O. 1842(1)/2023)

This notification clarifies the criteria for a business to be classified as a Tier-1 Retailer under the Sales Tax Act, 1990. It establishes a new threshold based on withholding tax deductions:

  • Tier I Retailer are whose deductible withholding tax under section 236H of the Income Tax Ordinance, 2001 during immediately preceding twelve consecutive months has exceeded Rs. 100,000 have been prescribed as Tier-1 retailers.

Notification 2: Mandatory POS System Integration

This notification emphasizes the requirement for Tier-1 Retailers to integrate with the FBR’s POS system for real-time sales reporting.

Key Points:

  • 1,680 businesses have been identified as Tier-1 Retailers based on their income tax withholding records. A list of these businesses is available on the FBR website.
  • The identified Tier-1 Retailers must integrate with the FBR’s POS system by May 31st, 2024.
  • Failure to integrate by the deadline will result in the disallowance of these retailers’ input tax claim for the June 2024 tax period, leading to a tax demand.
  • Businesses on the list who believe they don’t meet the Tier-1 Retailer definition can apply for exclusion to the Commissioner concerned.

Why the Push for POS Integration?

The FBR’s initiative aims to:

  • Enhance transparency and tax collection efficiency by tracking sales data in real-time.
  • Reduce discrepancies and ensure accurate tax reporting by Tier-1 Retailers.

What Businesses Should Do:

  • Check the list of identified Tier-1 Retailers on the FBR website.
  • If your business is on the list, initiate the process of integrating with the FBR’s POS system by May 31st, 2024.
  • If you believe there’s an error in your classification as a Tier-1 Retailer, contact the Commissioner concerned for exclusion.
  • Consult a tax advisor for specific guidance regarding your business situation and compliance requirements.

By complying with these regulations, Tier-1 Retailers can ensure smooth tax filing and avoid potential penalties.

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