KARACHI: Federal Tax Ombudsman (FTO) Asif Mehmood Jah has directed FBR to issue clarification to the field formations regarding the matter of showroom owners who deals with resale/purchase of secondhand vehicles not to include them in the definition of retailers.

Briefly, while deciding the complaint of M/S Itehad Motors who dealt with resale/purchase of secondhand vehicles of other persons on commission basis, FTO made these recommendation.

The Commissioner–IR Zone III,RTO-I registered the complainant as a Tier – 1 Retailer as area of his premises was more than 1000 sq.ft. Complainant came to know about it on receipt of Assessment order ,according to which a penalty of Rs.500,000/- was also imposed .Complainant averred that he does not fall within the definition of retailer ad he provides a service and accordingly registered with Sindh Revenue Board (SRB) and he used to file monthly sales tax return and used to pay provincial sales tax whenever he received a commission.

The complainant took up the matter with Federal Tax Ombudsman, the case was referred to Secretary Revenue Division for comments.

The Commissioner, Zone–III, RTO–I informed that the business activity of the complainant was taxable activity hence he was required to be registered in terms of Section 3(9A) of the Sales Tax Act, ibid and to integrate itself with FBR, being a TIER-1 in terms of clause “e” of sub section (43A) of section 2 ibid.

Whereas complainant averred that showrooms provide place only to general public for sale or purchase of their vehicles through showrooms for which they charge commission.

It was also averred that the sales tax, under the Sales Tax Act, 1990 was charged and paid on the vehicles at the time of import or on locally purchased one, hence charging sales tax again on the same time at its resale stage would be triple taxation.

Accordingly Tax Ombudsman observed that Federal Sales Tax Act, 1990 is charged and paid on vehicles at manufactured stage. FBR has to give adjustment of input tax, paid at import/local purchase stage under the sales tax law.

In that situation, the government would be looser as input tax would be higher than the output tax simply because of the reason that value of secondhand vehicle would be less than the new one he contention of the AR that role of showroom owner, in dealing with resale/purchase of secondhand vehicles of other persons, falls within the definition of service, is correct Hence activity of the complainant does not fall within definition of retailer as define in section 2 (28) of the Act by stretch of any imagination.

Tax Ombudsman recommended FBR to direct field formations not to register show rooms dealing with resale/purchase of secondhand vehicles of other persons as retailers and issue clarifications to all field formations in this regard.