Lahore Tax Bar Calls for FBR Action on SRO 350 Complications

Lahore Tax Bar Calls for FBR Action on SRO 350 Complications

Lahore, July 10, 2024 The Lahore Tax Bar Association (LTBA) has raised concerns about the challenges faced by businesses in filing sales tax returns following the implementation of a new regulation, SRO 350(I)/2024.

In a letter sent to the Federal Board of Revenue (FBR) Chairman, Malik Amjad Zubair Tiwana, on Wednesday, the Lahore Tax Bar Association highlighted the complexities arising from a rule amendment introduced by SRO 350. The amendment, implemented in March 2024, stipulates that a buyer’s sales tax return is considered provisional until the corresponding seller files their return for the same period by the end of the month.

According to the Lahore Tax Bar Association, this rule creates a domino effect. If a seller fails to file their return, the FBR’s IRIS Portal automatically removes invoices from the buyer’s Annexure A (a section detailing purchases with input tax credit). Consequently, the buyer’s input tax claim, which reduces their overall tax liability, is negatively affected.

The Lahore Tax Bar Association argues that while SRO 350 aims to improve tax compliance, it disrupts the smooth functioning of the supply chain, particularly for businesses that both buy and sell to each other. This can lead to delayed filing of returns, financial strain, and operational inefficiencies.

“It’s crucial to address this promptly to ensure tax compliance doesn’t hinder business operations,” the Lahore Tax Bar Association emphasized.

The association further highlighted a technical issue with the IRIS Portal. The system doesn’t allow adjustments to Annexure A and F (sections detailing purchases and input tax adjustments) beyond the provisional filing period. This means any unsubmitted purchase invoices are automatically removed from Annexure A at month’s end, reducing the overall purchase value and consequently the input tax adjustments claimable in Annexure F.

This technical glitch creates a negative net purchase value in Annexure F, while the sales value remains unchanged. This discrepancy prevents the filing of final returns and triggers error messages within the IRIS Portal.

The Lahore Tax Bar Association reports that attempts to resolve the issue at local tax offices have been unsuccessful. Tax authorities are reportedly demanding payment of inflated tax liabilities generated by the system, despite a significant portion of these businesses dealing in third-schedule products, where sales tax is collected from the end consumer and eventually refunded.

The Lahore Tax Bar Association urged Chairman Tiwana for immediate intervention. They argue that current regulations place a heavy burden on compliant businesses due to the non-compliance of others, which contradicts legal principles and fairness.

“Taking timely action to rectify this situation would be greatly appreciated and alleviate the hardships faced by taxpayers grappling with the implications of SRO 350(I)/2024,” the Lahore Tax Bar Association concluded in their letter.