Rules for Amendment in Chapter-VIIA for Online Integration of Businesses

Government of Pakistan (Revenue Division) Federal Board of Revenue ***** NOTIFICATION Islamabad, the 22"d March,2124 S.R.O. 428 (I)/2024. - In exercise of the powers conferred by sub-section (1) of section 237 of the Income Tax Ordinance,2001 (XLIX of2001), Federal Board ofRevenue is pleased to direct that the following further amendments shall be made in the Income Tax Rules, 2002, the same having been previously published vide Notification No. S.R.O. 1845(l)12023, dated 22nd day ofDecember,2l23 as required by sub-section (3) ofsection 237 ofthe said Ordinance, namely: - In the aforesaid Rules, in chapter-VllA, (1) in the heading after the words "ONLINE INTEGRATION OF BUSINESSES", the expression "PART-I PRELIMINARY" shall be inserted; (2) for rule 33A, the following shall be substituted, namely: - The provisions of this Chapter shall apply to all persons "33A. Application. - mentioned in column (2) of Schedule excluding those specified in column (4)."; (3) in rule 33B, - (a) in sub-rule (1), - (i) after the word "install", the words "and integrate" shall be inserted; and (iD after the expression "software,", the expression "through a licensed integrator" shall be inserted; (b) in sub-rule (2), (D after the words "Board", the expression "on and after l't July, 2024,"; shall be inserted; (iD in clause (e), the word "and" occurring at the end shall be omitted; and (iiD in clause (1), for the full stop at the end, the expression "; and" shall be substituted and thereafter the following new clause (g) shall be added, namely: "(g) licence number of licensed integrator."; (c) in sub-rule (3), the words "duly accredited", shall be omitted; (4) for rule 33C, the following shall be substituted, namely:

"33C. Licence of points of sales (POS) systems. - A licensed integrator, who wants to supply an electronic fiscal device and software must apply to the Board for the licence."; (5) in rule 33E,- (a) in the heading, for the word "intervening" the word "Initial transitioning" shall be substituted; (b) in sub-rule (1), for the word "intervening" the word "Initial transitioning" shall be substituted; (c) in sub-rule (3), the words "seven clear days in any case", the word "seven days or any extended period of time as determined by the concerned commissioner which shall not exceed sixty days." shall be substituted; (6) for the SCHEDULE-I and SCHEDULE-II, the following shall be substituted, namely:- "THE SCHEDULE [see rule 33Al S.No Description Exclusion, if any 1 2 -) Where 1. Restaurants the facility of air conditioning is not installed. Where Hotels, motels, guest houses, the facility of air conditioning is not installed. 2 marriage halls, Marquees, clubs including race clubs. Where - (a) The ta"xpayer is only providing non air 3 Inter-city travel by road. conditioned travel service; or (b) Travel service maintaining a fleet of less than five vehicles. Courier services and cargo 4. services Services provided for personal Where care by beauty parlours, clinics the faciiity of air-conditioning is not installed. ) and slimming clinics, massage centres, pedicure centres. All medical service providers Where - including dentists, the fee charges are less than Rs. 500/- 6 phys iot herap ist s. plastic surgeons, hair implant surgeons, and veteri doctors. Pathological laboratories, medical diagnostic laboratories 7 including X-Rays, CT Scan, M.R. Imaging etc.

Private hospitals or medical care centres providing medical8. consultation, hospitalization or other ancillary services Health clubs, gyms, physical fitness centres, swimming pools and multipurpose clubs such as Lahore gymkhana, Islamabad 9 club, Chenab Club, Karachi gymkhana, Royal Palm Lahore, Polo club etc. operated by any civilian/ non-civilian administration. Photographers, videographers Where 10. and event managers The fee charges are less than Rs. 50,000 per event Accountants defined as (a) a Chartered Accountant within the meaning of the Chartered Accountants Ordinance, 1 961 (X of 1 961); or 11 (b) a Cost and Management Accountant within the meaning of the Cost and Management Accountants Act, 1966 (xIV of 1966). Retailers including A retailer who does not fall in any of the manufacturer cum-retailer, lollowing categories. namely: wholesaler-cum retailer, importer-cum-retailer or such (a) a retailer operating as a unit of national or other person who combines the intemational chain of stores; activity of retail sale with (b) a retailer operating in an air-conditioned another business activity. shopping mall, plaza or center, excluding kiosks; 12. (c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds rupees twelve hundred thousand; (d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to retailers as well as on retail basis to the general body of consumers; or (e) a retailer whose shop measues one thousand square leet in area or more. Foreign Exchange i3 Dealers/Exchange Companies. Private schools, colleges, Where universities, professional The fee per child is less than Rs 1,000 per month. t4 institutes/ vocational training centers

PART-II - INTEGRATED ENTERPRISES AND LICENSING THER.EOF Definitions. Unless there is anJthing repugnant or contrary to the Income Tax - Ordinance, 2001 (XLX of 2001) and Income Tax Rules, 2002, the following words and expressions shall have meanings assigned to them as under: - (a) Applicant means any company or AOP which makes an application for a license under these rules; (b) Licensing Portal means a web portal, prescribed by the Board, used for: - o Registration. licensing, suspension and cancellation of the license of Licensed Integrators;i Registration oflntegrated Enterprise;. . o Recording and reporting ofinvoices. (c) Integration means the real-time process through which the invoice can be read or utilized by Board's prescribed system on a prescribed format. (d) Licensed Integrator means any company or AOP having a valid license, issued by the Board to integrate Integrated Enterprise. 33H. Licensing. - (1) No person shall carry out Integration ofthe Integrated Enterprise through a software unless they have obtained a license under these rules. (2) No licensee under these rules shall maintain or operate a system or provide any other service, which is not authorized under these rules. (3) Every payment counter whether fixed or portable, which generates invoices for receipt of payment either in cash or through debit or credit card or any digital channel shall be integrated with the Board through the system licensed by the Board. (4) An Integrated Enterprise, who has already developed an in-house POS solution, may apply for license to the Board, with the condition that the license will be non-replicable and non-distributable to other businesses entities. (5) A Licensed Integrator, who has obtained a license under Sales Tax Rules.2006. shall be considered as a licensed integrator under these rules. 33I. Functions of the Licensing Committee. (1) The Board shali notify a licensing committee which shall function in accordance with the provisions of these rules or any other instructions, procedures issued in this respect. (2) An officer of Inland Revenue nominated by the Member Digital Initiatives shall be the convener of the iicensing committee. 33J. Application for Grant oflicense. (1)Ar application for grant of license for - Integration ofany Integrated Enterprise, shall be submitted through the Licensing Portal prescribed by the Board. Provided that until a Licensing Portal is made available under sub rule (1), such applications shall be submitted manually or electronically in such form and manner as may be prescribed.

(2) No application under sub rule (1) shall be considered, unless it is accompanied by (i) a comprehensive profile of the company or AOP. (ii) brief about managerial and technical personnel indicating name, position, qualification and experience; (iii) total number of current employees; (iv) documents showing relevant capacity of the development and integration with enterprise resource planning systems and Payment Processing Systems; (v) registration certificate issued by Pakistan Software Houses Association and Pakistan Software Export Board. In case of a consortium or joint venture, at least one member or partner needs to have this registration. (vi) retums of Income filed for the last three tax years (must be on the Active Taxpayer's List); (vii) list of major clientele; (viii) incorporation ce(ificate under the Companies Act,2017 or relevant legislation; (ix) National Tax Number (NTN) Certificate: (x) the paid-up capital,/business capital for the latest tax year is Rs.10 million or above; (xi) Computerized National Identity Cards (CNICs) of directors of the company or members of the AOP, as the case may be; (xii) undertaking that the company or AOP has never been blacklisted by any Govemment or Provincial department or organization and has not been involved in any cases of fiscal fraud; (xiii) list ofprojects executed in the last three years; and (xiv) any other documents required though instructions and orders issued by the Board. (3) The system-based solution offered by the applicant must: (a) Develop, test, and certi! business software for real-time invoicing, ensuring compatibitity with existing systems ofan Integrated Enterprise; (b) Employ Agile methodologies for rapid adaptation to changing tax regulations; (c) Implement robust information security standards (encryption, multi- factor authentication, data integrity checks) and adhere to industry compliance standards including ISO 27001; (d) Defrne and implement open standards for seamless integration with Enterprise Resource Planning (ERP) and POS systems; (e) Utilize modem Application Programming Interface (API) and web services for effi cient data transmission, supporting industry-standard protocols (e.g. OAuth) for secure authentication; (f1 Implement remote monitoring tools for proactive issue detection and resolution. (g) Use advanced network and application tracing techniques for rapid troubleshooting: (h) Provide real-time reporting on system health and performance; (i) Employ anomaly detection algorithms to identit, and report unauthorized aclivities; Monitor the use of uncertified hardware or software and implement real- O time alerts for imrnediate response to potential security breaches;

(k) Design the system with built-in redundancy for continuous real-time reporting; (l) Ensure high availability to prevent interruption or loss of sales reporting and data; (m)lmplement failover mechanisms to switch seamlessly between redundant systems in case of failure; (n) Enforce compliance continuously through automated checks and real- time updates; (o) Implement mechanisms to adapt quickly to changes in tax regulations and compliance standards; (p) Provide comprehensive training for end-users to ensure effective use of the system; (q) Ofler responsive support services for troubleshooting and issue resolution; and (r) Maintain a knowledge base for users to access relevant information and updates. 33K. Procedure for Grant oflicense. (l) On receipt of application for grant of -license in the Board, the licensing committee shall scrutinize the documents provided. Thellicensing committee may also carry out visits, ifnecessary for physical inspection to alcertain the eligibility of the applicant for licensing under these rules. "(2) The licensing committee shall recommend or reject an application within forty five days of date of submission of the application, specifying reasons for rejection of any application under these rules: Provided that in cases of unforeseeable or unavoidable events or circumstances, beyond the control of licensing committee, an application for extension in timelines may be made to the Member Digital Initiatives and the Member Digital Initiatives may consider such application for extension. (3) The licensing committee shall make recommendations to Member Digital Initiative for grant of license. 33L. Rights Granted to the Licensee. (l) A licensee shall install, configure, integrate, operate and maintain the point of sale on real time basis in accordance with conditions of the license issued to him. (2) The license granted under these rules shall be subject to provisions of the Ordinance and shall be valid for five years from date ofissuance. (3) The license granted under these rules shall be non-transferable and shall not be allowed to be used by any sub-contractor. 33M. Renewal of license.- (l) The apptication for renewal oflicense shall be made to the Board three months before its expiry. (2) The licensing committee shall evaluate the application and make recommendations to Member Digital Initiatives for the renewal of the license or otherwise. 33N. Technical support. - (l) The licensee shall be responsible for post deployment maintenance of Point of sale as detailed below:

(a) setting up and maintenance of all information technology equipment; and (b) the licensee shall be authorized to, - (i) upgrade and enhance the system; (ii) all bug fixes; and (iii) immediate response to trouble shooting ofany post deployment problems for unintemrpted working of the system. (2) The licensee shall be responsible for the provision of the system logs, if and when required by the Board. (3) The licensee shall be responsible for safe and secure capture of real time tralsmission of invoices from its point of origin to the Board's computerized system at all times. 33O. Responsibilities of the Member Digital Initiatives.- An officer of the Inland Revenue, Member Digital Initiatives shall be responsible for overall supervision ofthe system and the steps taken to address problems encountered during operation of the systems. 33P. Procedure for suspension, cancellation or termination oflicense. (1) Member Digital lnitiatives as a result ofsupervision of the system or on receipt of a report from any of the Commissioner Inland Revenue, or on a complaint, has reasons to believe that the licensee has; (a) failed to provide specified services to the satisfaction of the Board; (b) tempered with the system; or (c) contravened any provision of these rules or the Income Tax Ordinance, 2001. Member Digital Initiative shall immediately refer the matter to the licensing committee for further action under these rules. (2) Where the licensing committee, on the basis of material evidence, is satisfied that there are sufficient grounds against the licensee, the following procedure shall be followed, namely: Suspension and Cancellation.- (i) The licensing committee shall suspend the license for the period ofone month to safeguard public revenues and to prevent any other serious damage. (ii) Such suspension of the license shall take place through a system generated order ofthe licensing committee, specifring reasons for suspension. (iii) Following the suspension, the licensed integrator shall cease to have access to online portal and all the Integrated Enterprises integrated by such licensed integrator shall be sent notifications through the online system with an option to change their licensed integrator. (iv) The licensed integrator shall, within one month of issuance of order of suspension, satisfu the licensing committee, through a scheduled hearing, clearly indicating that the contraventions and violations pointed out in the suspension order or any practices of misreporting ofinvoice has been rectified. (v) After giving an opportunity of hearing to the licensed integrator through a scheduled hearing, if the licensing committee is satisfied, it may issue an order through system for revoking of

suspension of the licensed integrator; consequently, licensed integrator's access to the online portal will be reinstated. (vi) In case. after giving an opportunity of hearing, if the offence is confirmed, the licensing committee shall issue an self-speaking appealable order through system for cancellation ofthe license of the licensed integrator, and shall proceed to take legal and penal action under the relevant provisions ofthe Ordinance and Rules; (vii) Following the cancellation, the licensed integrator shall cease to have access to online portal and all the Integrated Enterprises integrated by such licensed integrator shall be sent notifications through the online system to change their licensed integrator within one month of the receipt ofsuch notification. cancellation of license or change of licensed(3) Intervening Period. - (i) After integrator. as the case may be. the licensed integrator authorized lor integration ofan Integrated Enterprise with Board's computerized system shall ensure provision of smooth, uninterrupted handing-over or migration of the system to the new licensed integrator for integration under these rules failing which proceedings under the act shall be initiated. (ii) In cases where a licensed integrator is delisting an Integrated Enterprise, such Iicensed integrator shall notiry the licensing committee and ensure provision of smooth, unintemrpted handing-over or migration ofthe system to the new licensed integrator for integration under these rules failing which proceedings under the act shall be initiated: Provided that where an Integrated Enterprise is changing licensed integrator or the license integrator is delisting an Integrated Enterprise, during the intervening period until the new licensed integrator has integated the Integrated Enterprise, the Integrated Enterprise shall continue issuing invoices through the web API or offline local software data controller module as prescribed under the act and the relevant rules. (4) Appeals Against Suspension and Cancellation of License (a) Board shall notifu a grievance redressal committee which shall function in accordance with the provisions ofthese rules or any other instructions, procedures, issued by the Board. (b) An appeal against any appealable order passed under these rules, shall be filed to the grievance redressal committee, within 30 days of issuance of such order. tkough the licensing portal in the manner prescribed under these rules. (c) The grievance redressal committee may, after giving the concemed parties to the appeal an opportunity of being heard, pass such order, to confirm or cancel the order appealed against: ' Provided that such order shall be passed not later than 60 days from the date of filing ofappeal. Order passed by the grievance redressal committee shall be implemented by Member Digital Initiatives. 33Q. Audit of the License Integrator.- Member Digital Initiatives, on his own or on the written complaint by the concemed Commissioner, may authorize an officer of the Inland Revenue to conduct system audit ofLicensed Integrator or Integrated Enterprise.

33R. Fee and Charges. (l) The licensee shall charge the fee for configuration and - integration ofpoint ofsale f'rom the Integrated Enterprises. (2) No fee shall be charged from any ofthe field formation orthe Board. 33S. Responsibilities of the Integrated Enterprises.- The lntegrated Enterprises shall * (a) make all payment counters comprising of point of sale at each out [et, available for installation of the systems; (b) be responsible for smooth functioning ofpoint of sale; (c) report to the Board and the concemed Commissioner Inland Revenue within twenty four hours of any operational failure, damage disruptions or tampering of the system; or (d) report any inoperative point ofissualce ofinvoice to the Commissioner Inland Revenue holding the jurisdiction. 33T. Functions of Commissioner Inland Revenue. (1) The Commissioner having jurisdiction, shall ensure proper and unintemrpted operation of the system through periodic visits by an officer of Inland Revenue authorized in this behalf. (2) Where a Person does not account for sales without generating an invoice containing QR code or FBR invoice number, the commissioner shall take action in accordance to the provisions of the Ordinance and rules." tF.No. 02-ITIPOS/Itu202 ll M,h#fuMsIt,rit*.ad) Secretary (Income Tax Policy)