FBR to Deny 60% Input Tax Credit to Tier-1 Retailers Who Fail to Integrate With POS System

The Federal Board of Revenue (FBR) has issued a list of 1,136 big retailers (Tier-1) who are required to be integrated with the FBR’s Point of Sale (POS) system, announcing that they would be denied 60 percent input tax credit in case of non-integration by October 10, 2021. The FBR issued sales tax general order (STGO) 3 of 2021 on Tuesday, as it decided to raise the sales tax demand against the big retailers placed in Tier-1 if they stay non-integrated with the POS system by the deadline. According to the FBR, in order to operationalize this important provision of law, a system-based approach has been adopted whereby all Tier-1 retailers who are liable to integrate but have not yet integrated with effect from July-2021 (Sales Tax Returns filed in August 2021), are to be dealt with as per the procedure laid down in STGO No. 1 of 2022 issued on August 3, 2021. The FBR said that vide the instant STGO, a list of 1,136 identified, Tier-1, retailers was shared on FBR’s web portal, allowing them to integrate with FBR’s system by October 10, 2021, and the procedure of exclusion from this list of 1,136 identified Tier-1 retailers should apply as laid down in Para 2 of STGO 1 of 2022. Upon the filing of Sales Tax Return for the month of September 2021, all notified Tier-1 retailers not having integrated as yet, the input tax claim would be disallowed without any further notice or proceedings, creating tax demand by the same amount, according to the FBR STGO. The list of non-integrated Tier-1 retailers will be updated on the FBR’s website on monthly basis and all those who do not integrate themselves with the POS software till the 15th of every month will be disallowed 60 percent input adjustment. If, however, a Tier-1 retailer feels that he/she is not a Tier-1 retailer in terms of Section 2(43A) of Sales Tax Act, 1990, he/she may also get himself/herself excluded from the list by applying to the Commissioner in stipulated time.