Failures in POS integration system: Chainstore Association concerned at deteriorating environment for tax-compliant retailers
LAHORE: The Chainstore Association of Pakistan, representing the country's organized retail sector, on Saturday, expressed grave concern over the deteriorating environment for tax-compliant retailers due to aggressive revenue enforcement and persistent failures in the FBR-POS integration system.
Comprising a large portion of Pakistan's retail and wholesale trade, the organized retail sector directly employs over one million people and supports a wide ecosystem including shopping malls, manufacturers, service providers, and the cottage industry. Retail brands are also a growing contributor to export earnings through physical stores abroad and cross-border e-commerce.
Despite being early adopters of the FBR-POS system and generating 25–30% of their turnover in taxes, compliant Tier-1 retailers are now facing a perfect storm of high tax rates, increasingly complex procedures, punitive enforcement, and unresolved system issues.
This year alone, several regulatory instruments including SRO 69(I)/2025, SRO 55(I)/2025 and the Tax Laws (Amendment) Ordinance 2025—have exacerbated compliance burdens without addressing critical FBR-POS system deficiencies. These include issues such as (1) POS profile expiry disconnections, rendering invoices unverifiable; (2) Incorrect POS status flags showing 'disconnected' despite active syncing; and (3) Weak support capacity of Pakistan Revenue Automation Limited (PRAL) to address technical challenges.
Compounding these technical issues is an increasingly punitive enforcement approach. Several compliant outlets experiencing system errors have been sealed without prior notice, and many retailers report being pressured to pay penalties exceeding Rs500,000 per outlet to reopen, apparently to increase short-term tax collections. Such measures erode business confidence, damage reputations, and undermine long-term documentation efforts.
'We fully support strict action against wilful tax evasion, but the current approach is causing heavy collateral damage,' said Asfandyar Farrukh, Chairperson of CAP. 'Law-abiding retailers are being penalised for compliance, while vast sections of the informal market remain untouched. This is not reform it is a rollback in the making.'
The reversal of key incentives has further compounded the crisis. The discontinuation of the 10–15% concessional GST rate for customers of integrated retailers has rendered many businesses uncompetitive vs the untaxed and undertaxed majority, leading to network consolidation and closures. In recent years, this reform vacuum has stalled employment growth, investment, and even export potential.
CAP also calls for formal inclusion in policymaking processes to ensure that ongoing and future reforms are informed by on-ground realities.
'Compliant retailers who invested in technology and compliance should be recognized as partners in reform. CAP and its members wholeheartedly support broadening of the retail tax base - but it must be fair, functional, and future-focused,' said Tariq Mehboob Rana, CAP Patron-in-Chief. 'Unless the current issues are urgently addressed, years of progress towards the growth of the documented sector risk being reversed.'
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
5 hours ago
- Business Recorder
ICAP says AOB in finance bill may not be appropriate forum
KARACHI: The Institute of Chartered Accountants of Pakistan (ICAP) has reviewed the discussions held during the Senate Standing Committee on Finance and Revenue's session on June 17, 2025, regarding the Finance Bill 2025, relating to proposed insertion of Section 58C into the Sales Tax Act, 1990. ICAP understands the Federal Board of Revenue (FBR) efforts to combat financial misstatements, which may be resulting in evasion of sales tax. However, ICAP explains that the Audit Oversight Board (AOB), proposed in the finance bill to conduct inspections of audit firms, may not be the appropriate forum, given its statutory mandate is limited to overseeing audit quality of Public Interest Companies (PICs) only under the SECP Act 1997. ICAP proposes that being national regulators of audit profession and equipped with a robust investigation mechanism under the Chartered Accountants Ordinance, 1961, be designated to fulfil this oversight role. The Institute further explains that its existing Investigation Committee, constituted under the ICAP Bye-Laws 1983, comprised a reasonable number of independent members and a senior legal professional. ICAP reiterates its openness to including a nominee from FBR, AOB, or SECP on the Investigation Committee to enhance transparency. It is also disclosed that over the past five years, many cases relating to complaints received from various regulatory bodies, including SECP, SBP, AOB, and FBR, have been processed under its investigation framework. ICAP emphasizes the effectiveness of this system and informed that it annually publishes a comprehensive investigation report, the most recent of which was shared with members and public on March 13, 2025. The Institute expresses its continued support for legislative and regulatory reform in the national interest and remains committed to strengthening professional accountability across the financial ecosystem but has a concern on the introduction of alternate inspection mechanisms which may not be productive and in line with international best practices. Copyright Business Recorder, 2025
Business Recorder
5 hours ago
- Business Recorder
FPCCI's BMP says budget lacks strategy to revive economy
LAHORE: The Federation of Pakistan Chambers of Commerce and Industry's Businessmen Panel (BMP) has raised strong concerns over the Federal Budget, calling it a document full of theoretical optimism but lacking the concrete execution strategy required to address Pakistan's deep-rooted economic and industrial challenges. The BMP leadership said the government missed a critical opportunity to push forward structural reforms and provide the private sector with practical relief to overcome prevailing financial hardships, rising production costs, and export stagnation. BMP Chairman and former FPCCI President Mian Anjum Nisar said the budget failed to outline any viable roadmap for industrial expansion, job creation, or meaningful growth in the manufacturing sector. He regretted that instead of facilitating businesses, the budget has prioritised tax revenue goals without fixing fundamental issues affecting productivity and competitiveness. He stressed that Pakistan's economic revival is not possible without the active engagement and support of the business community, which continues to feel sidelined despite repeated promises of stakeholder-driven policy. Nisar criticised the government's excessive reliance on indirect taxation and short-term fiscal tools, warning that such an approach will only widen inequality and hinder long-term economic planning. He pointed out that the government has introduced aggressive tax measures without corresponding reforms in documentation and enforcement, creating fears of harassment among already compliant businesses. He strongly opposed granting tax authorities unchecked powers, such as freezing business accounts without prior notice, terming them anti-business and contrary to the spirit of voluntary compliance and trust-building. He said that the Rs1,000 billion earmarked for development spending is inadequate to meet the pressing infrastructure needs of Pakistan's economy, especially in industrial zones, ports, logistics corridors, and power transmission lines, adding unless these funds are used transparently with strict project prioritisation, they will have minimal impact. He urged the government to revive long-stalled industrial and transport infrastructure projects, which are essential to improving supply chains and reducing the cost of doing business. He also expressed serious disappointment over the continued neglect of value-added sectors, particularly textile, apparel, and light engineering, which are the backbone of Pakistan's export economy. Nisar reiterated the BMP panel's longstanding demand for the revival of the zero-rated regime and the removal of procedural hurdles in sales tax refunds. He noted that working capital remains stuck in refund cycles, which creates a liquidity crisis for exporters already struggling with thin margins and delayed shipments. He called for a complete rethinking of the country's tax strategy. Instead of placing more burdens on the formal sector, the government should broaden the base by targeting untaxed segments and expanding documentation through rational incentives. The business community has long urged for a simplified and predictable tax regime with reduced compliance costs, which remains unmet in the current budget. The panel emphasized that a true economic turnaround can only be achieved through structural reforms, reduced dependency on IMF programs, and the formulation of a long-term industrial policy. It pointed out that over reliance on remittances, foreign loans, and import-based revenues is unsustainable and exposes the country to repeated cycles of crisis. BMP urged the government to shift from short-term fire fighting to institutional capacity-building, export diversification, and innovation-led growth. BMP reaffirmed its commitment to standing with Pakistan's business community and offering constructive solutions, but stressed that the government must match its words with action and work hand in hand with stakeholders to lift the economy from stagnation toward sustainable, inclusive growth. Copyright Business Recorder, 2025
Business Recorder
6 hours ago
- Business Recorder
Finance bill contains drafting errors: experts
ISLAMABAD: Finance Bill (2025-26) contains drafting errors and contradictions amongst taxing statues including Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005. Tax experts told Business Recorder that policymaker has been harmonizing the parallel provisions contained in the Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005 as all these are administered by the same officer of the field formations. But contrary to the established policy and past practice through Finance Bill 2025 certain contradictory amendments are proposed. The tax experts have pointed out that earlier all the three taxing statutes contained a provision that after issuance of show cause notice the assessment order was to be passed within a specified period and this provision was interpreted as mandatory in various judgments of the Supreme Court. Budget FY25-26: Finance bill still being discussed, says FBR However, through Finance Bill the provisions contained in Section 122(9) of the Income Tax Ordinance, 2001 is proposed to be omitted meaning thereby that there would be no time limit for passing the assessment order after issuance of show cause notice and practically the same can be passed within five years of the end of the Financial Year in which the relevant return of total income was filed. Contrary to this, the identical provision contained in Section 11G of the Sales Tax Act, 1990 and sections of the Federal Excise Act would be continued. This differential treatment in the taxing statute administered by the same assessing officer does not sound to reason and is contrary to the norms of justice and fair play. When contacted, Shahid Jami, a Lahore based tax lawyer, explained that though Anomalies Committees have been constituted by the Federal Government but such fine points are not likely to be addressed by them as this may not be considered anomaly by them. He pointed out a drafting error according to which sub-section (1) of Section 46 of the Sales Tax Act, 1990 pertaining to appeal to the Appellate Tribunal is intended to be substituted and the proposed amendment provide appeal only against the appeal order passed by the Commissioner (Appeals) and contrary to the earlier provision existing for decades no appeal has been provided against the order passed by the Zonal Commissioner and FBR under the Act or Rules. Jami stated that the wording appears to be erroneous in drafting and not intentional change in policy as the words 'under this Act and Rule made there under' exist in the proposed amendment but the authorities of Zonal Commissioner and FBR are missing. It is imperative that such drafting errors and contradictions are removed from the Finance Bill for uniformity of taxing statues and to protect the rights of the taxpayers. Copyright Business Recorder, 2025
