FBR plans to launch single sales tax return portal

Online portal one of World Bank's conditions to release $400 million loan

ISLAMABAD:

The Federal Board of Revenue (FBR) has planned to launch the single sales tax return filing portal on coming Tuesday without first developing a legally compliant and well-integrated system.

The online portal -- to be reported launched by Prime Minister Imran Khan and aims at ensuring filing of one sales tax return instead of six -- is one of the World Bank conditions to release a $400 million loan.

It is to be noted that India implemented the system four years ago.

The FBR plans to inaugurate the portal on December 28. In this connection, it has informed the provincial governments --who are the main stakeholders in the scheme -- about the launching date, according to sources and official documents of the FBR.

At present, six tax authorities are operating in the country and receiving sales tax returns separately. These are: the FBR, Punjab Revenue Authority (PRA), Sindh Revenue Board (SRB), Khyber-Pakhtunkhwa Revenue Authority (KPRA), Balochistan Revenue Authority (BRA) and Council Board of Revenue AJK.

“The FBR intends to activate the single sales tax portal/return and the prime minister has been requested to formally inaugurate the single sales tax portal, most probably on December 28, 2021,” according to a FBR communication with the provinces issued on December 15.

The sources, however, told The Express Tribune that neither the provinces were ready to plug into the system nor there was any portal developed that could effectively start operations by January 1, 2022.

In its correspondence with the provinces, the FBR has claimed that the single sales tax portal has been prepared in pursuance of the government’s desire to facilitate taxpayers, promote ease of doing business and reduce compliance costs after discussions and agreements with the provincial revenue authorities.

Subsequently, on December 21, the FBR sent another letter to the provinces, asking them to nominate representative(s) for a committee to be set up for the resolution of issues arising out of the single sales tax portal/return and harmonisation of the rules.

“The launching of the portal without first developing a real one can cause embarrassment for the federal government,” a provincial government representative said while speaking on the condition of anonymity.

The single tax portal is aimed at facilitating taxpayers to file single monthly sales tax returns instead of multiple returns (six) on various portals that will significantly reduce time and the cost of compliance.

Read FBR head of technology walks away

The portal would also be beneficial for tax collectors in having a 360-degrees view of a taxpayer’s business activities across the country in order to maximise revenue potential and tax compliance.

“The single sales tax portal is extremely important for ease of doing business and resolution of interprovincial issues,” said Punjab Revenue Authority Chairman Zainulabidin Sahi. But he said that the provinces’ recommendation was that it should be launched in a phased manner.

The government is also seeking a $400 million loan from the World Bank under the Resilient Institutions for Sustainable Economy (RISE-II). One of the conditions was that the federal and provincial finance departments should issue implementing regulations following the approval of common GST laws passed by the federal and provincial assemblies to generate a harmonized GST for goods and services across the country.

Another condition is that the federal and provincial governments will adopt uniformed property valuation rates. Both the conditions remain unimplemented.

Disputes remain unresolved

The FBR has made a plan to launch the system despite serious issues hampering the integration. The sources said that the so-called new system was aligned only with FBR law as provincial laws have not yet been amended to allow such integration.

The FBR-developed system can only determine tax payable based on origination, which is the viewpoint of Sindh, but the system is not capable of separating services where GST tax is being collected on the point of termination, the sources said.

There was also no system to determine who would assess and audit the returns filed on the single portal. Another unresolved issue is that provincial HS codes are different from the FBR, which would have made it difficult to integrate the laws.

More importantly, there are different GST rates in the country, as Sindh charges 13% GST on services, Punjab (15%) and the FBR charges 17% GST.

The taxpayers are registered in multiple jurisdictions. There is no clarity as to who will register and de-register them after the launch of the new portal.

“The FBR-designed portal is not able of auto calculate input and output tax adjustments among six tax authorities,” said the sources.

But Sahi said that no Information Technology-based system is perfect at the time of launching and the issues arising during the implementation phase can be solved with the passage of time.

Read more FBR moves to prevent undue delay in tax disputes

The Express Tribune had sent a set of questions to FBR spokesman Asad Tahir three days ago but he did not reply.

He was asked to comment whether it was correct that the prime minister would launch the single sales tax portal on December 28 to enable taxpayers to file single monthly sales tax returns instead of multiple returns.

Tahir was also requested to comment whether the four provincial revenue authorities were fully on board and is the FBR system aligned with all provincial authorities’ laws to determine input, output tax adjustments and final payment share of the FBR and the relevant provincial authorities.

Another Centre-Province Dispute

The federal and provincial governments have not been able to resolve the dispute over property taxation. Punjab has opposed the FBR determining its own valuation rates.

Punjab has proposed that instead of adopting the FBR valuation tables by the provincial government, the DC valuation tables prepared in consultation with the FBR should be adopted by the FBR, according to communication between Punjab and the federal government.

The Punjab Board of Revenue is of a view that the FBR should adopt the DC valuation tables as the same are notified according to the fresh surveys of the field officers in consultation with the FBR and are more accurate.

Further as per the rules ibid, DC valuation tables are notified once in a year and no second revision is allowed.

The FBR had recently notified new property valuation rates but it had to suspend those after serious anomalies were pointed out by the real estate sector players.