Karachi, May 24, 2025 — The Karachi Tax Bar Association (KTBA) has sounded the alarm over the Federal Board of Revenue’s (FBR) sweeping changes to sales tax return filing, warning that the system overhaul under SRO 578 has pushed the entire business community into chaos.
The KTBA has declared that sales tax compliance has become nearly impossible under the current digital regime.
In a high-profile seminar held in Karachi, the KTBA spotlighted the avalanche of challenges facing taxpayers due to the FBR’s newly introduced sales tax filing system. Experts and tax professionals shredded the new annexures, particularly the controversial Annexure C1, calling it a “compliance nightmare.” Muhammad Usman Farooq, presenting a detailed breakdown of the revised sales tax return format, said the changes have added layers of complexity without providing adequate technical support or training.
The KTBA minced no words, stating that the new sales tax filing process has halted operational efficiency. Businesses, especially SMEs, are struggling to cope with the immense data required — including details on every customer payment, issuing bank, cheque numbers, and payment instruments. “We are being forced into a data jungle without a compass,” remarked one KTBA member.
Annexure C1, the crown jewel of the FBR’s reform, demands granular tracking of payments against sales invoices, demanding details such as customer CNICs, invoice numbers, payment dates, and issuing bank details. This level of micromanagement has led to an administrative meltdown, particularly for retailers and wholesalers handling high transaction volumes.
Adding fuel to the fire, KTBA said credit sales — where payments often arrive after the tax period — now pose a timing hazard, making correct sales tax filing nearly impossible under the existing rules. Businesses face the threat of non-compliance through no fault of their own.
The KTBA also raised red flags on Annexure H-1, which requires traders and distributors to furnish detailed stock movements monthly. This includes opening stock, purchases, sales, and closing inventory — all reported at cost, with zero margin for estimation errors.
Annexure J has also come under scrutiny for calculating stock values using a flawed logic that mismatches cost and retail prices, triggering discrepancies in sales tax returns.
KTBA is now demanding immediate reforms and a rollback or postponement of the new filing system to avoid what they warn could be a “taxpayers’ revolt.” They stressed that unless FBR listens, sales tax filing could become an unmanageable disaster for Pakistan’s already strained economy.