The government has enforced a new regulation to bring wholesalers and retailers into the tax net. The Federal Board of Revenue (FBR) will require POS-system linkage if withholding tax exceeds set thresholds. First major measure targets tax compliance and GST collection.
Government brings wholesalers & retailers into tax net
New rule links adjustable withholding tax, POS system and business registration
To expand the tax base, the government has introduced a regulation forcing major wholesalers and retailers into the formal tax net. Under the rule, if adjustable-withholding tax on a business exceeds Rs 100,000 monthly for wholesalers or Rs 500,000 for retailers, the business must be connected to a Point of Sale (POS) system.
The FBR has also made business registration mandatory. This gives tax officials the ability to assess actual sales by wholesalers, distributors and retailers and boost General Sales Tax (GST) collection.
Retail outlets already faced higher withholding tax rates under Sections 236G and 236H of the Income Tax Ordinance. In the last fiscal year the FBR collected approximately Rs 82 billion from retailers in income tax. The salaried class alone paid over Rs 600 billion in income tax.
Only businesses where the withholding tax deduction crosses the stated thresholds will face the new integration requirement. The FBR amended the Sales Tax Rules 2006 under Section 50 of the Sales Tax Act 1990, read with Sections 22 and 23, via a notification issued on Tuesday.
By linking POS systems and enforcing registration, the government aims to bring the wholesale-retail sector into the tax net and improve tax compliance and GST revenue collection.
