Karachi, February 4, 2025 – The Karachi Tax Bar Association (KTBA) has proposed comprehensive solutions to resolve the persistent issues taxpayers face while filing sales tax returns.
In a formal communication addressed to Ms. Aisha Farooq, Director General of Withholding Taxes at the Federal Board of Revenue (FBR), KTBA outlined specific recommendations aimed at removing obstacles in the sales tax return filing process. The association emphasized the urgent need to rectify recent changes that have complicated tax compliance for registered persons.
KTBA President Ali A. Rahim highlighted in his letter that since the modifications were introduced in November 2024, businesses and individuals have encountered significant difficulties in accurately filing their sales tax declarations. The KTBA identified key areas of concern and provided detailed suggestions for resolution.
Restriction on Voluntary Disallowance of Input Tax in Annexures A & B
One of the primary concerns raised by KTBA is the removal of the option to voluntarily disallow input tax related to non-taxable or exempt supplies. Previously, taxpayers could adjust such input tax through Column No. 7 of the Sales Tax Return. However, the updated system now mandates the selection of each invoice in Annexure A or each Goods Declaration (GD) in Annexure B individually, making the process cumbersome and time-consuming, especially for businesses handling thousands of invoices.
KTBA’s Recommendation:
KTBA strongly urges the FBR to reinstate Column No. 7 in the Sales Tax Return, allowing registered persons to voluntarily disallow input tax from Annexure A or B with an option to provide explanations or attach supporting evidence. Alternatively, KTBA suggests introducing a feature in Annexures A and B that enables multiple invoice or GD selections based on filter criteria such as supplier name, HS codes, nature of goods, or tax rate.
Adjustment of Minimum Value Addition Tax Paid Under Section 7A
Another critical issue KTBA highlighted is the removal of the provision to disallow additional sales tax paid against minimum value addition at the import stage. The absence of this adjustment feature in Annexure B results in incorrect tax calculations and non-compliance with statutory obligations. Previously, this feature was included in Column No. 7 of the Sales Tax Return.
KTBA’s Recommendation:
To rectify this issue, KTBA proposes modifying Annexure B to reinstate the provision allowing taxpayers to adjust for the minimum value addition tax paid at the import stage. This amendment will ensure accurate tax liability determination and compliance with tax regulations.
KTBA firmly believes that addressing these concerns will significantly streamline the tax filing process, reduce administrative burdens on taxpayers, and enhance overall compliance. The association remains committed to working collaboratively with the FBR to implement these necessary reforms and facilitate a more efficient tax system.