POS INTEGRATION SYSTEM WITH FBR

ARTICLE/COMPILATION ON FBR POS INTEGRATION SYSTEM

 

The purpose of the document is to facilitate TIER 1 retailers to understand invoice data sharing methods with FBR. The software fiscal component will be installed on the same computer on which POS is installed. The fiscal component will be integrated with the POS system to fiscalize the invoice and returns the Fiscal Invoice Number. For further guidance on the integration of retails outlets with Board’s computerized system follow procedures as provided under Chapter XIV AA Online Integration of Tier-1 Retailers of the Sales Tax Rules 2006.

Images given below will also facilitate to understand the system.

All Tier-1 Retailers (for each branch) are required to integrate all their POSs with FBR’s computerized system. ‘Tier-1 retailer’ is defined in section 2(43A) of the Sales Tax Act, 1990, to be a person who falls in any of the following categories:

 (a)       a retailer operating as a unit of a national or international chain of stores;

 (b)      a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;

 (c)       a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand;

 (d)      a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on a wholesale basis to the retailers as well as on retail basis to the general body of the consumers”; and

 (e)       a retailer, whose shop measures one thousand square feet in area or more.

POS integration is mandatory for all tier-1 retailers irrespective of the items they are dealing in. All Tier-1 retailers whether dealing in textile and leather items or any other item are required by law to integrate their POSs with FBR’s system.

The rate of sales tax for items sold by integrated retailers shall be the same as for all other suppliers as provided under the Sales Tax Act, 1990. The only exception is for locally manufactured textile and leather items, which if sold by integrated retailers are subject to a concessionary rate of 14%, and if sold by any other supplier is subject to 17% standard sales tax. Category-wise rates for items sold by integrated retailers is as below:

 

Item category	Rate of sales tax	Example
Items falling in Sixth Schedule to the Sales Tax Act, 1990	Exempt i.e. no sales tax to be charged	Milk, rice, wheat flour, pulses, fruits & vegetables (except canned and packaged), uncooked meat, poultry, eggs, stationary items, medicines, laptops and personal computers etc

Items falling in Eighth Schedule to the Act	Reduced rate as provided in the Schedule	Dairy items other than milk, fat-filled milk (tea-whitener), flours other than that of wheat, if sold in retail packing under a brand name, are subject to sales tax rate of 10%; and prepared products of meat or meat offal, if sold in retail packing under a brand name, are subject to sales tax rate of 8%; Precious jewellery at 1.5% of value of gold, plus 0.5% of value of diamond, used therein, plus 3% of making charges
Finished fabric, and locally manufactured finished articles of textile and textile made-ups and leather and artificial leather (See S. No. 66 of Table 1 of Eighth Schedule)	14%	Locally manufactured Garments, shoes, bags, made-ups etc of textile, leather and artificial leather
Mobile phones and satellite phones	Under Ninth Schedule, sales tax is to be paid by the importer and manufacturers only. No sales tax to be charged on subsequent supplies. However, suppliers may pass on the burden of sales tax charged on their purchases at their selling price.	Mobile phones and satellite phones
Items not covered above	Standard 17%	Items in the Third Schedule except for fertilizers, imported textile and leather items, electronic items, watches, sugar, hardware, sanitary ware, kitchenware, toys, furniture, sports goods, surgical instruments, crockery, plastic products, imitation jewellery, etc

Note: Examples given above are indicative only. For detailed lists, descriptions and applicable conditions refer to various Schedules of the Act.

The software employed by the retailer should be able to handle returns and exchanges. Such software makes the necessary adjustment to sales revenue and the same is also reflected in sales reported to FBR. In case such returns and exchanges are not properly reflected, the retailer can make use of debit / credit notes and records the same in Annex-I of the monthly sales tax return.

 

Retailer cannot delete any entries from Annex-C. However, if any sales could not be accommodated in Annex-C for any reason, the retailer is under obligation to add such sales to Annex-C. In case of return or cancellation of supply, the retailer should make adjustments through debit/credit notes to be recorded in Annex-I.

 

 For online sales, the tier-1 retailer should integrate the utility provided by FBR in his website and ensure that the sales are reported to FBR and FBR invoice number and QR code are printed on the invoice generated and sent to the online customer.

 Disadvantage to or penalty for tier-1 retailers who fail to integrate their POSs.Under section 33 of the Sales Tax Act, 1990, as amended by Tax Laws (Second Amendment) Ordinance, 2019, specific penalty has been provided for retailers failing to integrate. Under the newly added clause 25 in the Table in section 33, a tier-1 retailer failing to integrate shall be liable to a penalty of Rs. 1 million, and in the event of continuing failure may face sealing of his premises and embargo on his sales.

 Further, the disadvantage of failure to integrate, as provided in sub-section (6) of section 8B, is that the adjustable input tax of the retailer shall be reduced by 15%.

 If an integrated retailer tries to bypass the system and fails to report any sales to FBR. Under clause 24 of Table in section 33, such retailer shall face a penalty up to five hundred thousand rupees or two-hundred percent of the tax amount involved, whichever is higher. Such retailers may also be sentenced to imprisonment which may be extended to two years.

Clause 24, referred to above, also provides any person who abets or connives with the retailer in suppression of sales or non-reporting of sales maybe sentenced to imprisonment for a term which may extend to one year and also to a fine up to two hundred thousand rupees. Software vendor providing for skimming in the software shall be subject to these penal provisions.

 All those establishments, (including bakeries or sweetmeat shops) whether manufacturers or not, who sell their goods to the general public for consumption are retailers as provided in clause (28) of section 2 of the Sales Tax Act, 1990. Therefore, bakeries and sweetmeat shops, selling goods to the general public are also retailers. Therefore, such bakeries and sweetmeat shops, whether or not manufacturers also, shall be treated as a tier-1 retailer, if they fall in the definition of the tier-1 retailer as in clause (43A) of section 2 and they shall be accordingly required to integrate their POSs.

It is mandatory for all restaurants to integrate their POSs. Chapter XIV-A of the Sales Tax Rules, 2006 pertains to restaurants, snack bars, cafes, etc. All such establishments, whether or not falling in category of tier-1 retailers, are required to integrate their POSs under the said Chapter.