FBR Clarifies SRO 350 After Taxpayer Concerns

FBR Clarifies SRO 350 After Taxpayer Concerns

Karachi, July 10, 2024 – The Federal Board of Revenue (FBR) has responded to concerns raised by taxpayers, businesses, and tax professionals regarding complications arising from SRO 350(I)/2024, a regulation impacting sales tax return filing.

The FBR’s IT Wing issued an official communication addressing specific issues. One major concern involved sales tax returns becoming locked after the filing deadline due to automatic deletion of purchase invoices and input tax. This deletion occurs when corresponding suppliers fail to file their own returns by month’s end.

The FBR clarified that this is not a malfunction caused by SRO 350, but rather an intentional measure to curb the creation and transmission of fake input tax claims, which the regulation aims to prevent. The communication emphasizes, “If the system is auto-deleting the invoices which have corresponding input tax, then it is working correctly. Auto-deletion and recomputed liability shall remain in place even if the supplier files a return after the last day of the month.”

Another point of contention was provisional returns due to non-filing by state-owned gas and electricity companies, Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL). The FBR communication highlights that the Operation Wing addressed this concern through a June 4th, 2024 notification. This notification relaxes the rule that previously made returns provisional solely due to outstanding returns from SNGPL and SSGCL for the same month. The FBR communication requests that this relaxation be applied retroactively.

A third concern involved negative figures in Annexure F (detailing input tax adjustments) caused by automatic invoice deletion. The FBR communication acknowledges that registered persons manually populate consumption figures in Annexure F. To address this, they propose making Annexure F editable after the system removes invoices and input tax, allowing for adjustments to consumption figures.

Finally, the communication tackles the issue of provisional returns for distributors, wholesalers, and retailers dealing with third-schedule items (products where tax is collected from the end consumer). The FBR communication proposes a relaxation where such businesses can file provisional returns claiming input tax on invoices from manufacturers of third-schedule items, even if the manufacturer hasn’t filed their return for the same period. This relaxation would not apply to invoices from other registered persons.

The FBR’s communication aims to clarify the implementation of SRO 350 and address concerns raised by stakeholders. The proposed measures aim to ensure a smoother tax filing process while maintaining the integrity of the system.