Karachi, February 26, 2025 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has formally presented key sales tax proposals for the upcoming Budget 2025-26.
These recommendations, submitted to the Federal Board of Revenue (FBR), aim to address major sales tax challenges faced by businesses and taxpayers across the country.
In its proposal, the FPCCI highlighted the issue of Further Tax, which was reinstated in 2013 through subsection (1A) in section 3 of the Sales Tax Act, 1990. Over the years, the tax rate has gradually increased, reaching 4% in 2023. The purpose of this tax was to discourage sales to unregistered persons; however, the FPCCI pointed out that this measure has failed to increase the number of legitimate tax-paying registrants. As a solution, the FPCCI has strongly recommended that Further Tax be abolished to promote a more business-friendly environment.
Another major concern raised by the FPCCI is the Processing of Sales Tax Refunds for New Manufacturer Exporters. Under STGO 9, new manufacturers were initially required to submit sales tax refunds manually via ERS for 12 months before being eligible for the FASTER system. Unfortunately, delays in processing have prevented many manufacturers from transitioning to the automated system. To resolve this, the FPCCI has proposed an expedited refund process to ensure timely disbursements and seamless entry into the FASTER system.
Regarding New Sales Tax Registration, the FPCCI noted that prior to the Finance Act 2024, the registration process was fully automated. However, the newly imposed requirement for approval by LRO and RTO has complicated the process, discouraging new business registrations. The FPCCI suggests restoring automated registration for manufacturers and exporters with post-verification within 15 days, ensuring compliance while maintaining efficiency.
The FPCCI also recommended minimizing discrepancies in import levy rates, such as Withholding Tax (WHT) and Sales Tax, for industrial raw material imports by Commercial & Industrial Importers. Currently, commercial importers face higher levy rates, disadvantaging small and medium industries that rely on them for raw materials. The FPCCI urges the government to harmonize these levies to support industrial growth.
Additionally, the FPCCI has strongly opposed SRO 350(I)/2024, issued on March 7, 2024, to curb fraudulent invoices. While aimed at eliminating tax evasion, the FPCCI asserts that the onerous requirements of this SRO are increasing compliance costs for legitimate businesses. Despite subsequent amendments through SRO 582(I)/2024 and SRO 644(I)/2024, challenges persist. The FPCCI calls for the complete abolition of SRO 350(I)/2024 to facilitate ease of doing business.
With these comprehensive recommendations, the FPCCI continues to play a pivotal role in advocating for tax reforms that support Pakistan’s business community while ensuring compliance with fair taxation policies.
