Billions collected from retailers as PoS service fee allegedly misappropriated by tax officials

Tens of billions of rupees collected from tier-1 retailers nationwide on each sales invoice in the name of Point-of-Sale (PoS) service fees are allegedly misappropriated by tax officials.  

Dawn reported that the Rs 1 PoS fee was imposed by the Federal Board of Revenue (FBR) in August 2021 and was initially intended to promote documentation and reward customers through lucky draws. 

However, while the fee collection continued to date, the prize scheme was quietly suspended, raising questions about the current use of the collected funds.

FBR Chairman Amjed Zubair Tiwana acknowledged that over Rs1 billion is still available from the collected fees but did not clarify how these funds are being used or whether they are audited. 

He mentioned plans to relaunch the scheme through FBR-nominated vendors, addressing issues that arose from the initial third-party installations of PoS machines.

The continued collection of the PoS fee, included in the modified sales invoice under SRO 1006(I)/2021, raises legal concerns. The rule modification allegedly exceeds the FBR’s authority as per Section 23(1) of the Sales Tax Act, which does not empower the imposition of additional charges on the public.

Legal experts argue that Section 76 of the Sales Tax Act, which provides for service fees, excludes such fees from the definition of sales tax. The FBR’s approach to collecting the PoS fee without adhering to this section’s conditions and limitations has resulted in billions being collected without proper legal authority or accountability.

As the situation unfolds, the lack of transparency and potential misuse of the PoS service fee funds have sparked concerns, highlighting the need for stringent audit and regulatory oversight to ensure public trust and compliance with legal frameworks.