Federal Board of Revenue is the government body for tax collection in Pakistan. Under the jurisdiction of FBR comes the sales tax collection from the retailers that fall under the category of their tax bracket. Every retail outlet receives a 17% sales tax on every item sold, which must be paid to the FBR. Since there is no digitalized system to keep an eye on the retailers, the retailers collect billions of rupees in sales tax but have yet to pay to the FBR.
According to the studies, Pakistan’s shadow economy is approximately the same size as the regulated economy, which makes it around $345 Billion. FBR has taken severe steps to digitalize and monitor the sales tax collection with retailers through modern means to control the economy and tax collection. One of the steps they have taken is to obligate all the tier 1 retailers to integrate a point of sales software for their retail outlet that is integrated with FBR.
The software will sync all the sales data to FBR’s database and calculate the sales tax collected during the year. The mechanism eliminates the chances of tax fraud and fake reporting in the books. Most retailers think this is some kind of burden on their operations and bad for them, but on the contrary, it is for their benefit to comply with the FBR’s tax laws.
Before we get into the reasons why FBR wants retailers to integrate POS software, it is essential to know the following things:
What Is FBR Integrated POS Software?
FBR integrated POS software is a point of sales software that has an integration that connects the software to FBR’s database. The integration syncs all the sales data into the FBR’s database, so the FBR knows how many units a retailer has sold and asks the retailer to submit the sales tax according to the sales.
FBR does not launch its own FBR-integrated POS software. On the other hand, they made the POS software providers like CISePOS develop an integration that connects to the FBR.
What Is A Tier 1 Retailer?
According to the Sales tax act 1990, the definition of a Tier-1 retailer is a retailer operating as a unit of a national or international chain of stores. A retailer operating in an air-conditioned shopping mall, plaza, or center, excluding kiosks. A retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds rupees twelve hundred thousand (1200,000).
5 Reasons FBR Obligate Retailers To Integrate POS Software
Here are the five reasons:
1. Easy Tax Compliance
One of the core reasons why FBR wants retailers to integrate FBR-integrated POS software is to make tax compliance easy. Previously, every retailer had to maintain their sales books, calculate their sales tax, and then pay the FBR. It usually takes a week to reconcile the book, which has many discrepancies and errors.
FBR questions retailers about the discrepancies, making a scene out of the situation and demotivating the retailers to comply with tax obligations. With FBR-integrated POS software, tax compliance is effortless. Since your whole sales database is connected to FBR, the chances of errors are reduced, and it takes little time to keep the books.
2. Reduce Sales Tax Fraud
Sales tax fraud is when retailers hide their sales tax reports as fake or lesser sales, making their sales tax payable less. To reduce sales tax fraud, FBR obligates all tier 1 retailers to integrate FBR-integrated POS software that syncs all the sales data so they cannot alter their sales or sales tax amount.
Thousands of retailers falling under the slab of tier 1 retailer sync their sales data to FBR, where FBR calculates their sales tax, decreasing chances of misreporting of sales and sales tax.
3. Enforce Tax Laws
Enforcing tax laws is one of the critical responsibilities of FBR. FBR ensure that every eligible business and individual must pay their taxes on time. A large portion of total tax collection in Pakistan comes from sales tax paid by retailers and other companies that deal in DtoC business. To enforce the sales tax collection, FBR uses different means, including using FBR-integrated POS software for tier 1 retail businesses.
With the use of FBR-integrated POS software, FBR has done record sales tax collection in the past year showing the effectiveness of enforcing tax laws in Pakistan.
4. Increase The Sale Tax Collection
Sales tax collection has a large portion of total tax collection in Pakistan; thus, increasing sales tax collection is the primary motive of FBR to raise the entire tax collection. FBR uses tax rebates, the Tarif wave, and other schemes to promote tax culture and improve tax collection.
With FBR-integrated POS software, FBR wants to increase tax collection. With FBR-integrated POS software, it becomes quick. Moreover, FBR offers a lucky draw scheme for customers with receipts from FBR-integrated POS software; this prize scheme encourages customers to prefer shops with FBR-integrated POS software.
5. Develop Trust With The Taxpayers
Sales tax is not directly paid to the FBR by the end consumer. The retailer receives it, and then retailers file it with FBR and pay it. With no monitoring system and mechanism, taxpayers feel hesitant to pay their sales tax because they know there is a chance that this tax will never be delivered to FBR and will be in the pocket of business people.
With the digitalized medium, taxpayers can trust their retailers to pay their taxes to FBR with FBR-integrated POS software.
Federal Board of Revenue encourages retailers to integrate FBR-integrated POS software for sales tax compliance. Moreover, the software itself will help you manage sales operations. CISePOS, Pakistan’s easiest POS software, has FBR integration, allowing businesses to comply with FBR and efficiently manage their sales operations.
With its easy to use, affordable and efficient operations, CISePOS is the best FBR-integrated POS software in Pakistan.