FTO prevents taxmen from sealing retail shops

In a major relief for tier-I retailers, the Federal Tax Ombudsman (FTO) has issued a comprehensive ruling in favour of the formal retail sector, directing the Federal Board of Revenue (FBR) to stop sealing shops and address critical technical issues in the Point-of-Sale (POS) system.

A complaint, filed by the Chainstore Association of Pakistan (CAP), highlighted serious concerns including POS system failures, excessive integration costs, profile disconnections, missing invoice uploads and the lack of coordination between the FBR and its automation wing – Pakistan Revenue Automation Limited (PRAL).

The FTO has directed that no sealing of tier-I retail outlets should be carried out until all technical issues were fully addressed. It recommended the FBR to consult CAP on future POS-related glitches and enforcement strategies to ensure mutual resolution of issues and smoother compliance.

The FTO ruling strongly criticised the lack of technical training among FBR's field officers, noting their inability to resolve system-specific issues, and advised enhanced coordination with PRAL.

"The FBR is instructed to develop a forewarning system for tier-I retailers to inform them about POS disconnections, token expiry or auto shutdowns in order to avoid abrupt disruptions," it said.

The FTO recommended that POS security tokens should not expire before five years, with prior intimation to the retailer. The lack of a bulk download feature in the POS system – a longstanding concern among retailers – was acknowledged by the FBR, which submitted the Change Request Form. The FTO emphasised its urgent application.

The ruling confirmed that invoices frequently failed to sync with FBR servers and retailers faced "fake disconnect" errors, though the system was running. The FBR attributed that to substandard software, but the FTO stressed the need to resolve such issues technically and administratively.