Karachi – The Karachi Tax Bar Association (KTBA) has called upon the Federal Board of Revenue (FBR) to extend the deadline for filing sales tax returns, citing significant challenges posed by the recent implementation of SRO 350(I)/2024.
The request was made in a formal letter dated August 26, 2024, from KTBA President Syed Zafar Ahmed to the Member Inland Revenue – Operations at the FBR.
KTBA’s plea highlights the complexities and operational hurdles faced by taxpayers in complying with the new regulations under SRO 350 of 2024. The association noted that the new rules have made it virtually impossible for registered taxpayers to file their sales tax returns unless their suppliers have fully discharged their sales tax liabilities, declared their customers in Annexure-C, and filed their returns in compliance with Section 26 of the Sales Tax Act, 1990.
Challenges in Compliance
The core issue, as outlined by the KTBA, revolves around the inability of taxpayers to submit their sales tax returns if their suppliers fail to do so. This failure not only prevents the submission of monthly sales tax returns but also impedes the adjustment of input tax. Furthermore, it creates discrepancies in the legitimacy of refundable claims related to exports, as reported in Row 29 of the sales tax return.
The letter emphasized that the current system marks submitted returns as provisional and non-editable drafts. This issue is further compounded by frequent error messages on the FBR web portal, particularly the error stating: “Row 29 cannot be greater than Row 28.”
Consequences of the Current System
The KTBA has outlined several consequences resulting from the current situation:
• Filing Hindrances: Registered taxpayers are unable to file their sales tax returns within the stipulated time frame due to persistent error messages.
• Non-Active Status: The failure to file returns for two consecutive tax periods has led to taxpayers being marked as ‘non-active’ on the IRIS portal.
• Additional Tax Charges: Due to the non-active status, taxpayers are subjected to an additional sales tax of 4% under Section 3(1A) of the Sales Tax Act, 1990, which is non-adjustable.
KTBA’s Recommendations
In response to these challenges, the KTBA has proposed several measures to the FBR:
1. Extension of Filing Deadline: The KTBA has requested an extension for the e-filing of sales tax returns under Section 26AB of the Act until the issues are resolved. This extension should be automatic for all registered persons unless explicitly rejected.
2. Maintaining ‘Active’ Status: A mechanism should be implemented to ensure that taxpayers remain in an ‘Active’ status on IRIS, even if they cannot file returns due to portal issues.
3. Final Submission Recognition: To avoid the non-active status, the first submission of the return should be marked as the final submission on the IRIS portal.
4. Editable Return Fields: The KTBA has requested that Row 29 of the sales tax return be made editable to allow for necessary adjustments.
The KTBA’s appeal underscores the urgent need for the FBR to address these technical and procedural challenges to prevent widespread non-compliance and undue penalties on taxpayers. The association hopes for a prompt and favorable response from the FBR to mitigate these issues.