ISLAMABAD: The “IRS” system of the Federal Board of Revenue (FBR) is incorrectly marking taxpayers as “non-active” despite the recently extended deadlines for filing sales tax returns in February and March 2025, it was learnt.
This has created a panic like situation among the business community. A number of taxpayers have raised concerns about being labelled as “Inactive” due to not filing their sales tax returns for two consecutive periods, creating unnecessary hassle.
It has become evident that the sales tax return filing system is struggling significantly after the implementation of numerous recent changes. Consequently, the Federal Board of Revenue (FBR) extended the filing deadlines for February and March 2025.
Sales tax, federal excise: FBR extends date of filing returns
Explaining the issue, a leading Karachi-based sales tax expert, Arshad Shehzad, informed over the last couple of months, the FBR has introduced mandatory requirements for an eight-digit Harmonized System (H.S.) code, units of measurement, as well as, Annexes introduced new annexure ‘H-1’, ‘J’, and ‘C-1’ in sales tax returns.
Arshad Shehzad explained that taxpayers must now provide an eight-digit H.S. code for every item sold. While it is straightforward for imported items, where taxpayers can easily reference the H.S. code from the import Goods Declaration (G/D), problems arise for locally manufactured goods. Many manufacturers are not familiar with the proper H.S. codes for their products. Furthermore, discrepancies in H.S. codes reported for the same item by different suppliers create significant confusion among taxpayers.
Shehzad strongly advocates that the board should shift its focus from requiring specific H.S. codes to demanding clear descriptions of items. The system should then automatically assign the appropriate H.S. codes based on these descriptions, effectively reducing the burden on taxpayers and ensuring uniformity.
In addition, he highlighted the issue with limiting unit of measurement reporting to only kilograms (K.G). He firmly believes that all units of measurement should be made available in an electronic dropdown menu, eliminating unnecessary complications. The tax department can always have ample powers to seek clarification for any issues regarding units of measurement at any subsequent stage if required instead of being tied to restrictive reporting requirements.
The introduction of Annex “J,” which pertains to production data, and Annex “H-1,” which relates to stock reporting by entities other than manufacturers, should be implemented in a phased manner. This approach should include seminars and workshops to provide the necessary education and support, rather than imposing these changes abruptly in the middle of the tax year.
Copyright Business Recorder, 2025
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