ISLAMABAD: The Federal Board of Revenue (FBR) continues to withhold multi-million rupee collections from customers on sales invoices on account of the point of sales (POS) prize scheme despite lapse of several months, Dawn has learned from official sources.

The POS prize scheme, utilising computerised balloting to select winners from invoices by tier-1 retailers, was initially suspended from November 2022 till Jan 31, 2023, aiming to enhance inclusivity.

However, despite a verbal order from former finance minister Ishaq Dar to resume the scheme in March, it remains inactive, a senior tax official on condition of anonymity told Dawn on Saturday. Mr Dar discontinued the scheme in Nov 2022.

Under the POS prize scheme, retailers collect an average of Rs30 million to Rs40m per month on behalf of the FBR through transactions. This amount is then deposited with the FBR when tax returns are filed.

Scheme initially suspended until Jan 31 to enhance inclusivity

However, there is a risk of evasion if retailers fail to file their tax returns, potentially enabling them to avoid payment of the collected amount.

The tier-1 retailers collect Re1 per invoice from customers under Section 76 of the Sales Tax Act 1990 to encourage the documentation of the economy. The first computerised draw was held on Jan 15, 2022 at the FBR headquarters.

The FBR announced prizes worth Rs53m, including the top prize of Rs1m, two prizes worth Rs0.5m, four prizes of Rs0.25m and 1,000 prizes of Rs50,000 each, in the first draw. Since then, the FBR conducted 10 draws on the 15th of every month.

So far, the POS prize scheme has collected approximately Rs1 billion from customers on behalf of the FBR.

In Feb 2023, the rules of the scheme were made public, stating that the amount collected under the scheme would be for the Inland Revenue Services welfare projects. This news triggered criticism against the then FBR chairman for amending the rules to divert the funds to the Common Pool Fund (CPF) for the welfare of employees.

An official stated that the implementation of these rules was verbally halted at the direction of former finance minister Mr Dar. However, there is no written order regarding this decision, he further claimed.

The official also mentioned that, according to the rules, only 10pc of the allocation will be for the prize scheme, while the remaining will be directed towards IRS welfare projects.

Until the last prize draw, finance ministry allocates funds for the POS prize schemes. However, according to the official, no amount has been used so far for either the prize scheme or the welfare project from the amount deposited by the retailers with the FBR.

The rules of the scheme have not been implemented so far, the official said, adding that the reason for this delay is that it would require the establishment of a separate secretariat.

The heads of expenditure provided in the rules for employees’ welfare project include financial assistance to families of the martyred, subsidies for marriage expenses, health insurance, children’s education scholarships, headquarter support allowance, fuel subsidy for junior officers, IRS officers’ mess, house rent subsidies, and support for widows and burial expenses.

The scheme was introduced by the PTI-led coalition government to integrate tier-1 retailers with the FBR’s electronic system of real-time reporting of sales. A domestic bank used this model to increase its deposits from a few million per month to Rs4bn. Turkey also successfully used the same model for documenting sales.

The FBR held out an assurance to IMF to take the number of POS to at least 60,000 in FY22, which was missed by a large margin, and give Rs100m prizes per month and raise this amount to Rs1bn per month to encourage customers to demand computerised bills.

Published in Dawn, August 20th, 2023