The Federal Board of Revenue (FBR) in Pakistan is tightening its grip on tax collection from large retailers. A new Sales Tax General Order (STGO) No. 01 of 2024 mandates the integration of Tier-1 Retailers (T-1Rs) with the FBR’s Point of Sale (POS) system for real-time sales reporting.
This directive comes after amendments to the Sales Tax Act in 2019 and 2021. These amendments imposed a penalty on non-compliant retailers in the form of reduced input tax credit. Initially, the reduction was 15%, but the latest legislation raised it to 60%.
So, who needs to integrate? The FBR classifies retailers whose deductible withholding tax under the Income Tax Ordinance exceeds Rs. 100,000 in the preceding twelve months as Tier-1 Retailers. This classification makes it mandatory for them to register and integrate with the FBR’s POS system.
The deadline for integration is set for May 31, 2024. A list of 1,680 identified T-1Rs is available on the FBR website ([https://fbr.gov.pk/](https://fbr.gov.pk/)) for reference. Missing this deadline will have significant consequences. Starting June 2024 (reflected in July’s Sales Tax Returns), any unintegrated T-1Rs will face automatic disallowance of their input tax claim, translating to immediate tax demands.
However, retailers who believe they have been incorrectly classified as Tier-1 can appeal the decision. The appeal process requires them to approach the concerned Commissioner for exclusion from the list, following the procedures outlined in STGO 17 of 2022.
The FBR’s latest initiative signifies a more stringent approach towards enforcing tax compliance among large retailers in Pakistan. Integrating with the POS system will allow for real-time monitoring of sales activities and ultimately enhance tax collection efficiency.
