Task force proposes flat tax rate on basis of location

SOHAIL SARFRAZ

ISLAMABAD: The Task Force of the Federal Board of Revenue (FBR) to bring retail sector into the tax net has proposed flat tax rate on the basis of geographical location and covered area of the commercial establishments and retail outlets.

Sources told Business Recorder here on Monday that the FBR’s task force has submitted its suggestions to the FBR for bringing the retail sector into the tax net. Mrs. Yasmin Saud Member (HRM) is the Chairperson of the Task Force while the members are Amir Ali Khan Talpur Chief Commissioner; Nadir Mumtaz Warriach Commissioner; Asim Ahmad Commissioner; Dr Faiz Illahi Memon Commissioner and Abdul Hameed Memon Addl. Commissioner.

Task Force has proposed to the FBR that every withholding agent making taxable supplies to retailers may be obliged to obtain name and CNIC/NTN from the buyer and provide to tax authorities. Task Force has also proposed strict enforcement of tax laws to document the retailers.

Firstly, all commercial connections of electricity and gas may tagged with NTNs in collaboration with WAPDA and Gas Supplier companies respectively in order to have access to utility payments of the consumers.

Secondly, the withholding Income Tax rates under section 235 of the Income Tax Ordinance to be enhanced for un-registered commercial consumers carrying on business.

Thirdly, on analogy of manufacturers, paying Rs 700000 and more as utility bills, are liable to be registered and charged under Sales Tax Act, the retailers paying utility bills above threshold of Rs. 200,000 per annum may also be obliged to be registered and charged Sales Tax Act.

Fourthly, withholding regime under section 234A of the Sales Tax Act may be extended to un-registered commercial consumers, ie, restaurants, bakers, caterers and confectioners etc. Fifthly, the FBR should introduce a simplified income tax return for retailers. Sixthly, mandatory production of NTN for obtaining commercial electricity connection.

Seventh, survey of pre-identified markets supported with massive publicity of enforcement measures be taken by the FBR. Eightth, the FBR should establish permanent cell comprising IT Wing and Chief Commissioners for generation of reports of un-enrolled potential taxpayers. There is also required automation back-up for enforcement initiatives.

Alternative approach of flat rate on the basis geographical location and covered area of the commercial establishment is worth considering with benefits of guaranteed revenues and little expected resistance from the taxpayers. The approach has its limitations also, Task Force added.

The Chairman Federal Board of Revenue had constituted a Task Force to study and propose policy options and appropriate measures for bringing retail sector into the tax net and for ensuring due contribution by the retailers under the sales tax and income tax laws in consonance with the share of the retail sector in the GDP. Under the terms of reference of the Task Force, it was required to evaluate the existing regime of taxation of retail sector, identify the tax gap in retail sector and loop holes in the existing scheme, propose policy and enforcement measures for bringing the retail sector into the tax net and to ensure due contribution of the retailers.