KARACHI, August 8, 2025 – The Federal Board of Revenue (FBR) has announced new restrictions on input tax adjustment, linking the process to its Compliance Risk Management (CRM) system.
The move aims to bring greater transparency, reduce discretion, and strengthen compliance across various sectors.
According to Sales Tax Circular No. 2 of 2025, an amendment to sub-section (4) of section 88 of the Sales Tax Act, 1990—introduced through the Finance Act 2025—authorizes the FBR to determine a specific limit for input tax adjustment based on CRM assessments. This structured approach is intended to provide an objective, data-driven basis for setting limits under section 88, thereby minimizing arbitrary decisions.
Taxpayers who believe that their input tax adjustment has been unfairly restricted will be able to submit an application to the Commissioner. As per the new provisions, the Commissioner must decide on such applications within sixty days, ensuring timely resolution and reducing uncertainty for businesses.
The FBR also emphasized that any input tax-related restrictions or adjustment conditions will not be altered without meaningful engagement with business and trade representatives from the affected sectors. This consultative approach seeks to balance enforcement with the operational realities of taxpayers.
Officials noted that integrating CRM with the input tax framework represents a significant step toward targeted compliance, enabling the FBR to focus on high-risk areas while facilitating compliant taxpayers.