Lahore RTO deputes tax men at private luxury clubs to control sales tax evasion

[Naveed Yaseen]

SOHAIL SARFRAZ & ZAHID BAIG
ISLAMABAD (March 26 2009): The Regional Tax Office (RTO), Lahore has decided to depute sales tax officials within the premises of private luxury clubs offering food to their customers in posh areas without payment of due amount of sales tax to the exchequer. Sources told Business Recorder on Wednesday that the restaurants are also located in the private clubs.

The private clubs are also engaged in extending commercial services to VVIPs. Like hotels and restaurants, private luxury clubs are engaged in offering luxury facilities like food on marriages.

Certain clubs have also established restaurants to offer food to their clients. Some of the clubs are not paying the due amount of sales tax and are non-compliant to sales tax audit. The RTO Lahore would depute sales tax officials at the premises of these clubs without discrimination, sources said.

Responding to a query, sources said that the RTO would take action even against Pakistans biggest private club located in Lahore in case evasion of sales tax is detected. If the luxury club dealing with VVIPs is not paying sales tax, section 40B of the Sales Tax Act would be exercised in these cases as well. The private clubs, engaged in offering food, are also covered under this criterion for posting of sales tax officials under section 40B of the Sales Tax Act.

The RTO would depute sales tax officers for inspection of hotels, restaurants and private clubs on the basis of risk based parameters without any exemption. This would encourage the compliant hotels etc, to compete with the non-compliant units by stopping them from evading sales tax.

Sources said that it is the best initiative taken by the FBR Member Inland Revenue to check revenue leakage. It would be ensured that there will be no pick and choose policy and the operational management has to select only non-compliant hotels and restaurants.

According to sources, it has been observed that many restaurants charge tax from customers but do not reflect the sales invoices in their returns. The massive evasion of sales tax by private clubs and hotels in Lahore is evident from the fact that restaurants in posh areas such as M M Alam Road, Defence and Private Clubs are showing their sales less than Rs 10,000 per day.

A survey revealed that their bill to one family meal at restaurants is roughly Rs 10,000. These restaurants have created serious problems for the documented units, who are accurately paying sales tax. The RTO has accordingly devised strategy to extend maximum facilitation to compliant taxpayers but has decided to check the sale of such restaurants that are massively under reporting.

Sources said that RTO Lahore has devised parameters and criteria for deputation of sales tax officials at hotels, etc, under the guidance of Shafqat Mehmud Collector of Sales Tax. It is learnt that initially the RTO has decided to post staff at these restaurants for monitoring of their sales.

The staff shall only be removed when these restaurants and club start making correct payment. For this purpose the FBR has laid down broad parameters to select the non compliant taxpayers. This step shall be very welcome for taxpayers who were finding a difficult to compete with those who were cheating the government as well as their customers.

It is further learnt that RTO shall be launching awareness campaign for the taxpayers to demand the invoice or receipt indicating the "sales tax registration numbers". It will duly reward the customers whose invoice was found not accounted for by the restaurants.

Moreover, the RTO Lahore shall extend the supervise clearance in those sectors where there is visible evasion of tax. It is also learnt that sales tax Collector Lahore has taken the chamber on board for scrutiny of the taxpayers who were not paying due tax passing on the burden to compliant sector.

As a part of reforms process, the FBR has finally realised that there has to be level playing fields for all kinds of taxpayers. Accordingly, it has focused such taxpayers who through not their sales or under reporting their purchases to avoid the due tax payment. These taxpayers get an advantage on honest taxpayers who correctly make their declaration in their returns.

The non compliant taxpayers through not paying the due tax sell their products at lesser price and succeed in capturing the market. The Sales Tax Wing has detected a number of restaurants who are not their reporting sales correctly. Meanwhile, the FBR has amended its instructions of March 24 and empowered the collectors of sales tax to depute sales tax officials within the premises of hotels and restaurants.

Previously, Director Generals of the RTOs were empowered to post sales tax officials at the premises of hotels and restaurants. Now, collectors of sales tax can exercise these powers without approval of the Director Generals. The para 2 of the FBR instructions has been amended to empower the collectors of sales tax for exercising section 40B of the Sales Tax Act.

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