FBR tells senate only 2,195 retailers registered under fixed tax scheme

The Federal Board of Revenue told the Senate Standing Committee on Finance and Revenue that only 2,195 retailers registered

Islamabad: The Federal Board of Revenue told the Senate Standing Committee on Finance and Revenue that only 2,195 retailers registered under the 1 percent fixed tax scheme during the first two months of its operation. The committee raised questions about the low participation of traders and called for stronger efforts to bring businesses into the tax system.

The FBR chairman briefed the committee during its meeting at Parliament House, chaired by Senator Saleem Mandviwalla. Senators Farooq Hamid Naek, Sherry Rehman, Shahzaib Durrani and Anusha Rahman Ahmad Khan attended the meeting, along with the Minister of State for Finance and Revenue.

The committee was informed that the government introduced the 1 percent fixed tax scheme after consulting with traders. A special application was developed to allow retailers to provide their details and complete registration. The Minister of State said technical problems had affected the application earlier but had now been resolved.

Despite launching the registration system, only 2,195 retailers had registered within two months. The registrations covered traders with annual sales of up to Rs20 crore. The committee discussed the low participation and sought information on how effective the scheme had been in increasing registrations, improving compliance and generating revenue.

Officials clarified that registration under the scheme is mandatory. Retailers are required to declare their income and file tax returns. The FBR has planned penalties in stages for those who do not comply: a fine of Rs10,000 at the first stage, Rs25,000 at the second stage and Rs50,000 at the third stage. Further enforcement action will follow against businesses that continue to remain outside the tax system.

The committee recommended a large awareness campaign so traders can clearly understand the registration process and tax requirements. It asked that advertisements be published and information flyers be distributed in markets. The FBR chairman, however, told the committee that awareness campaigns had already been carried out on a large scale.

According to the FBR chairman, some traders still believe that they will not face penalties if they do not register through the application. The committee’s discussion therefore focused on improving awareness as well as making the registration system easier for traders to understand.

The committee was also informed that the FBR had received 5.5 million tax returns so far, compared with 4 million returns during the same period last year. The committee noted the increase in the number of returns filed.

At the same time, officials said there were around 4.3 million commercial WAPDA electricity meters across the country, but only about six hundred thousand commercial meter holders had filed tax returns. The figures raised questions about the number of commercial businesses that remain outside the tax return system.

The committee also took up the issue of income tax refunds involving M/s Gumcrop Private Limited and M/s Oleocrop Private Limited. The FBR chairman assured the committee that the outstanding legitimate refunds of the two companies would be released within 15 days.

Another major issue before the committee involved alleged irregularities in issuing consumption certificates for raw materials worth Rs1.12 trillion supplied to factories operating in the tax-exempt areas of FATA and PATA.

The committee was informed that five people had been arrested in connection with the matter and that investigations were continuing. The committee also decided that the issue concerning the tax-exempt areas of FATA and PATA would be taken up as a single agenda item in future meetings for a more detailed examination.