ISLAMABAD: Federal Tax Ombudsman (FTO) Dr Asif Mahmood Jah has recommended the Federal Board of Revenue (FBR) to exclude furniture manufacturers from the category of Tier-I retailers (big retailers) through a policy amendment in the budget 2022-23.

In this regard, the FTO has issued recommendations to the FBR for the upcoming budget (2022-23) to exclude furniture makers, low income manufactures-cum-retailers from the provisions of the section 2(43A) of Sales Tax Act, 1990.

The FTO has recommended resolution of the grievance of furniture manufacturers by extending the area limit for furniture business registered as Tier-1 retailers with the FBR.

The complaints were filed by furniture manufactures from Islamabad against the Federal Board of Revenue (FBR), for exclusion of furniture business from Tier-I retailers applicable under section 2(43A) of Sales Tax Act, 1990 (the Act).

Briefly, the complainants stated that furniture shops/showrooms require a wide open space to display the bulky pieces of furniture in order to get orders from the customers, which is not meant for retail sale, however, they have to come in the tax zone because they have occupied the stipulated covered area.

As per section 2(43A) of the Sales Tax Act, shops which are situated in the air-conditioned malls or are part of national or international chain of stores or have covered area up to 1000 sq.ft. etc come in the ambit of Tier-I retailer and are required to be registered as such, but for the furniture shops/showrooms, they don’t fall in the above said category on grounds that they are mostly not located in the air-conditioned malls nor are part of national or international chain of stores nor they fall in the category of fast moving consumer goods.

Prior to budget 2021-22, the required covered area for registration as Tier-I retailer was 1000 sq.ft.

On pointation by Pakistan Furniture Association, the government enhanced the required covered area for furniture shops from 1000 sq.ft. to 2000 sq.ft. However, a furniture shop is required to have a spacious place for display.

The complainants prayed that direction be issued to the FBR to exclude the furniture shops/showrooms from the scope of Section 2(43A) of the Act and the condition of covered area may also be removed.

During investigation, it revealed that the contentions made by the complainants that application of clause (e) inserted vide Finance Act, 2019, of sub-Section 43A of Section 2 be excluded and not applied on furniture manufacturers. This is an issue related to policy matters and required intervention in the Sales Tax Act, which is beyond the jurisdiction of FBR

In view of supra, the FTO recommended to the FBR to examine this matter and to resolve this grievance of the furniture manufacturing taxpayers for creating ease in doing business and recommended that appropriate amendment in sub-section 43A of Section 2 of Sales Tax Act, 1990, be considered in favour of the Complainants and proposal for non-applicability of clause (e) of ibid may be incorporated in the forthcoming budget proposals for the year 2022-23. The complainants have appreciated intervention of the FTO in this long standing issue; due to which even low income manufacturers were being burdened with high tax due to the condition of only covered area, for selection of units as Tier-1 retailers, which in case of furniture makers, did not match with the sales of low income manufactures-cum-retailers, the FBR added.

This story was originally published in Business Recorder on March 27, 2022.