Tax officers in Pakistan authorized to seal outlets of non-compliant retailers

The Federal Board of Revenue (FBR) in Pakistan has granted inland revenue officers the authority to seal outlets of tier-1 retailers if they are found issuing unverified invoices or disconnecting from the FBR database for more than 48 hours.

The FBR has amended the Sales Tax Rules concerning the Point of Sale (POS) integration for tier-1 retailers.

The primary goal of the FBR POS integration is to digitize retail transactions and streamline the reporting of sales to the FBR, ultimately helping to capture more taxable sales.

Under the revised rules, retailers must ensure that any invoices generated during offline periods are recorded within 24 hours of reconnection. Failure to maintain proper invoice records during these periods will also result in the sealing of business premises.

Previously, FBR officials could only seal outlets if three unverified invoices were issued in a single day or five within a seven-day period for a single Sales Tax Registration Number (STRN).

All tier-1 retailers are required to integrate their POS systems with the FBR's computerized system.

Tier-1 retailers include those operating as units of national or international chains of stores, those in air-conditioned shopping malls, plazas, or centers (excluding kiosks), retailers with cumulative electricity bills exceeding PKR 12 million over the previous twelve months, wholesaler-cum-retailers engaged in bulk import and supply of consumer goods on a wholesale basis, and retailers with shops measuring 1,000 square feet or more.

Retailers bypassing the system may face penalties of up to PKR 500,000 or 200% of the tax amount involved, whichever is higher. Additionally, such retailers may be sentenced to imprisonment for up to two years.

According to the latest amendments, the Commissioner of Inland Revenue has the authority to deseal businesses within 24 hours of the payment of the penalty.