Netting black economy: Manufacturers to identify bulk purchasers

Retail sales remain exempted in a phased drive to enforce NTN/CNIC condition.

Our Correspondent February 24, 2012


In an effort to document black economy in phases, the government has decided to gradually enforce the condition of declaring national tax numbers or identity card numbers at the time of bulk purchases.

In this regard, the Federal Board of Revenue (FBR) has amended existing rules and added a chapter to Sales Tax Rules of 2006. According to a statutory regulatory order issued here on Friday, the condition will gradually be enforced from March to July this year.

In the first phase beginning March 1, all manufacturers, importers and exporters have been asked to make minimum 60% of their sales to identifiable persons having either sales tax registration number, national tax number (NTN) or computerised national identity card (CNIC).

While there are no official estimates of the size of the black economy, independent experts and former tax officials put the figure in the range of 50 to 60% of the total size of formal economy. For the current fiscal year, the projected size of national economy is Rs21.04 trillion, according to the finance ministry.

The government had earlier tried to enforce the NTN/CNIC condition from July 2011 but fierce opposition from businesses forced it to defer the plan to January 2012. Now, it has decided to fully implement the much talked about condition by July this year.

An official of the FBR said the purpose of gradual implementation was to facilitate the industry and now this condition would also be applied to the sugar industry, which had earlier been granted exemption.

However, retail supplies will remain exempted. According to the notification, manufacturers-cum-retailers and importers-cum-retailers making retail sales to unregistered persons will not be required to provide CNIC number or NTN to the extent of retail sales, which will be separately shown in sales tax return.

The notification further states that provisions of the newly added chapter will be applied to registered manufacturers, importers and exporters while making taxable, dutiable or exempted supplies to unregistered persons.

The FBR has asked all registered manufacturers, importers and exporters to issue an invoice containing NTN or CNIC number of the buyers. The sellers will be bound to declare 60% sales to identifiable persons in March. In April, the ratio will increase to 70%, in May 80%, June 90% and in July all sales will be made to identifiable persons only.

Currently, only 146,000 traders have sales tax registration numbers while less than 100,000 regularly file returns.


The notification states that if any registered person gives an NTN or CNIC number, which is not verified from the FBR’s database or database of the National Database and Registration Authority (NADRA), such person will have to pay a penalty of Rs5,000 or 3 per cent of the amount of tax involved, whichever is higher. The amount would be considered as arrears against the supplier.

Furthermore, all payments of the amount for transactions will be made by the buyers through bank instruments.

Published in The Express Tribune, February 25th, 2012.


Yusuf | 9 years ago | Reply

Vietnam has reduced poverty rate from 1993 to 2002 by thirty percent. Vietnam showed impressive growth performance by implementing land reform for better agricultural production, giving ownership right to poor farmers, Vietnam now compete in exporting agricultural products especially rice, pepper, coffee,and spice. Vietnam is now evolving from agricultural economy to now focused on higher value manufacturing. Vietnam once ravaged by war now becoming challanging Asian Tigers. Vietnam economy has expanded much faster than other Asian Tiger economies. Vietnam economy no longer revolves around agriculature, the shift has made poweful contribution to an Vietnam industrial economy. Where do we stand? The Pakistan FBR should be concentrating on rise of Pakistan economy and not penalising the registered tax payers. Penalites and Source of Income should be done away with. Pakistan Tax system should be made easy, simple, easy compliance, lower rate to stop smuggling, and to introduce agriculatural tax on large farm holdings. The rate of Sales Tax should be brought down under Ten Percent so there is disposable income for family to send children to school, health care for family, marriges, and investment in the Pakistan economy. We have done away with wealth tax lets do away with source of income to concentrate on simple " Income," tax. Lets make tax filing easy, one page for individuals, easy calculation, and easy tax payments. Lets give Benefit to Tax Filiers by giving them a " Stake," in Pakistan by retirement income from the Government of Pakistan like given to the Bureaucrats, Military, Government Employee of public enterprises, etc. Give Pakistani Individual a Stake in Pakistan so We have a " Return Benefit after crossing Sixty year of age or Sixty five . When you give Retirement Benefit, Millions in Pakistan will file Tax Return, simply Because of Benefit. Give Pakistan Citizen a Stake in Future. We will see Pakistan grown like Vietnam. We have the capacity, political will must be there.

Ali. Mir | 9 years ago | Reply

Some one has to explain the logic to me: on one had the FBR wants to give amnesty from probe about source of investment for investment made in Stock Exchange till 2014 and then it wants to net the other population?. This is sheer discrimination. FBR needs to think what it wants to do: tax or not tax

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