FBR urged to restrict retailers from dealing with unregistered manufacturers

LAHORE: The Friends of Economic and Business Reforms (FEBR) has once again appealed the Federal Board of Revenue (FBR) to make it mandatory for retailers to purchase “only from sales tax registered persons” instead of binding the manufacturers to sell their products only to registered suppliers and retailers.

“The condition of CNIC for retailers is adding tension among registered manufacturers, leading to a huge drop in their sales and grinding their business activities to a halt,” FEBR President Kashif Anwar said in a letter to FBR Chairman Shabbar Zaidi.

He reiterated his demand that the supplies shown by registered entities in their sales tax returns should be displayed automatically, as purchases are shown in the annual business income tax returns of those who are only registered in income tax. This will complete the supply chain from sales tax registered suppliers to the income tax registered purchasers, he added.

“With regard to purchases made by all retailers, suppliers, agents and others not registered in sales tax, we request that they may be enjoined to make purchases from sales tax registered persons because, in the case of sales tax registered persons, all purchases are automatically shown in Annex-A (Domestic Purchase Invoices) & Annex-B (Imports) to avail the benefits of input sales tax. Similarly, the purchases made by retailers, individuals and others not registered in sales tax must be automatically shown in their annual income tax returns against their NTNs,” the FEBR president stated.

The law has made it mandatory for every sales tax registered person, either manufacturer, importer, dealer, distributor, wholesaler or retailer, to mention sales tax registration number, national tax number or CNIC on sales tax invoice above Rs50,000 to feed Annex-C (Domestic Sales Invoices) of sales tax return, which automatically verifies the particulars of buyers and compiles their records internally.

If one does not provide NTN or CNIC, the proportionate input sales tax will be disallowed to the registered person.

On the other hand, all purchases of sales tax registered persons either local or imported are updated automatically to avail the benefit of input tax in their sales tax return and no purchase entry can be manual.

Anwar said the FEBR is not against documentation rather it propagates the benefits of becoming filer. But, he added, the condition of CNIC is creating problems for sales tax registered suppliers, and “it goes without saying that all the legal formalities are for those who are in the tax net and who are already documented.”

He said that the condition of mentioning STRN, NTN or CNIC to avail the full amount of input tax is for sales tax registered suppliers. “But how the chain of supplies (from supplier to purchaser) will complete when the retailer would not mention those particular purchases in their business income tax return? There is no doubt that retailers submit their business income tax returns and do mention the figure of their annual purchases against their turnovers, but those purchase figures are not verifiable and have no supporting evidence in actual,” he added.

The FEBR president said that the retailers normally hesitate to get sales tax invoice from registered suppliers. Mostly, he added, there is no proof with retailers regarding the justification of their purchases which they mention in their annual business income tax returns.

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