In a recent development that has caused widespread disruption among the business community, the Federal Board of Revenue (FBR) portal is currently denying input tax adjustments to registered sales tax persons, in the wake of the implementation of SRO 350.
Issued on March 7, 2024, this statutory regulatory order declared that all sales tax returns submitted would initially be treated as provisional. However, by month-end, the portal is set to reassess and potentially disallow the input tax claims for vendors who have not submitted their sales tax returns.
This systemic issue is leaving registered businesses in a bind, as the FBR’s sales tax return portal is reportedly disallowing the input tax across all registered entities in Pakistan, regardless of compliance status. This unexpected move has resulted in a cascade of administrative headaches, as businesses scramble to verify and reverify the submission of returns by their suppliers to secure their input tax claims.
Tax professionals are pointing to what seems to be either a significant technical glitch or a self-imposed restriction by the FBR that is causing these disruptions. The provisional nature of the sales tax returns has not only created uncertainty but also a redundant cycle of follow-ups among buyers and suppliers, complicating an already tedious tax filing process.
The situation poses a serious challenge for the FBR’s objectives under the recently launched Tajir Dost Scheme, aimed at integrating undocumented traders into the formal economy. The problematic handling of tax adjustments for already registered businesses raises concerns about the effectiveness of the government’s strategy to widen the tax net.
“As long as these glitches persist, it is highly unlikely that traders outside the tax system will feel encouraged to register,” noted a senior tax consultant, who preferred to remain anonymous. “The existing taxpayers feel neglected, almost like stepchildren, which certainly doesn’t paint a welcoming picture for potential registrants.”
Further compounding the issue is the reported cold response from the FBR to the grievances of affected taxpayers. Many have voiced their frustrations about the lack of support and clarity on resolving these issues, which has led to increased operational costs and hindered financial planning for numerous businesses.
Despite the turmoil, only about 200 traders have reportedly registered under the Tajir Dost Scheme since its inception last month. This lukewarm response can be attributed partly to the current complications experienced by those already within the system, underscoring a significant trust and efficiency gap in the administrative processes of the FBR.
The business community is calling for an urgent and transparent resolution to these issues. Clear communication and swift rectification of the portal’s functionalities are deemed crucial to restoring confidence among Pakistan’s taxed sector and to successfully integrate more traders into the formal economy.
As of now, the FBR has not issued an official response to the allegations of technical difficulties within the portal. The continuation of these problems could have long-term detrimental effects on the country’s tax administration and its relationship with the business community, potentially hampering economic growth and tax compliance initiatives in the future.
