FBR considering ways to penalize traders who are not registered

Only 105 merchants have registered for the current Tajir Dost Scheme, hence the FBR is considering eliminating the Non-Active Taxpayer List (Non-ATL) and charging outrageous fees of 10–15% for sales to unregistered retailers.

Rather than going after the nation’s 3.6 million merchants, the FBR is considering many measures to render non-registered enterprises unviable.

The only way to do that is by taking severe administrative actions.

Therefore, measures are being considered to impose a very high rate—between 10% and 15%—on the sale of products at the wholesaler/distributor stage and require all buyers of commodities in bulk to submit Computerized National Identity Cards (CNICs).

Sales to distributors, dealers, and wholesalers listed on the Active Taxpayer List (ATL) are subject to an advance withholding tax of 0.1% under Section 236G of the Income Tax legislation, while sales to non-ATL parties are subject to a 0.5% advance withholding tax.

Advance taxes are levied on sales to merchants under Section 236H; the advance tax is 1% for non-ATL retailers and 0.5% for ATL retailers.

Currently, it is being considered to maintain the same withholding tax rates on ATL sales to distributors, dealers, and wholesalers, while imposing a tax of between 10% and 15% on non-ATL sales.

The same will apply under Section 236H, where the rate for ATL taxpayers will stay the same while the rate for non-ATL taxpayers is anticipated to increase by up to 10% to 15%.

According to FBR official data, there are around 0.5 million dealers, distributors, wholesalers, and retailers operating under both ATL and non-ATL tax law requirements.

It is now suggested that all manufacturers and suppliers in the supply chain obtain CNICs in order to penalize unregistered individuals with higher advance withholding tax rates.