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List of Tier1 Retailers not integrated with point of sales system of FBR and not allowed input tax credit

FBR Amends Sales Tax Return Form to deny 60pc input tax to nonintegrated retailers

The Federal Board of Revenue (FBR) has brought amendment in the monthly sales tax return form to disallow 60 percent input tax credit to big nonintegrated Tier-1 retailers who have still not integrated their businesses with the FBR’s point of sales (POS) system.

In this regard FBR has issued SRO No. 407(1)/2022 Dated: March 8, 2022 to the Sales Tax Rules, 2006 for revision of the monthly sales tax and federal excise return form (STR-7).

This amendment in the sales tax return form would also allow the reversal of inadmissible input tax for the Tier-1 retailers after their integration with the FBR’s POS system. Thus, now the retailers, who get integrated with the FBR’s system, can legally claim the adjustment under the return form.

By bringing this amendment the FBR has given legal cover to the reversal of the decision of the disallowance of 60 percent input tax credit to big retailers (Tier-1).

To put into effect the decision, the FBR has added two new columns, viz. 6B and 6C in the sales tax return form. Under column 6B, inadmissible input tax has been incorporated in terms of section 8B of the Sales Tax Act. Under column 6C, there is a provision of the reversal of inadmissible input tax. Subject to exclusion as provided under sub-para (II) & (III) of para 2 of the sales tax general order (STGO) No. 1/2022.

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The FBR had already issued a list of 1,358 big retailers (Tier-1), who are required to be integrated with the FBR’s POS system and would be denied 60 percent input tax credit in case of non-integration by February 10, 2022.

Federal Board of Revenue (FBR) has decided to raise sales tax demand against these big retailers (Tier-1), who are still nonintegrated with the FBR’s Point of Sales (POS) system by the deadline of February 10, 2022. According to the FBR, in order to enforce this important provision of law, a system-based approach has been followed.

Definition of Tier-1 Retailer under sales tax act 1990

All tier-1 retailers are required to integrate all their POSs with FBR’s computerized system. ‘Tier-1 retailer’ is defined in section 2(43A) of the Sales Tax Act, 1990, to be a person who falls in any of the following categories:

(a) a retailer operating as a unit of a national or international chain of stores;

(b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;

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(c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand;

(d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”; and

(e) a retailer, whose shop measures one thousand square feet in area or more.

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