The Karachi Chamber of Commerce and Industry (KCCI) has voiced strong criticism against the Federal Board of Revenue (FBR) for its recent move to declare numerous taxpayers as inactive. This action comes despite the FBR having officially announced an extension for filing sales tax returns for the months of February and March 2025.
KCCI President Muhammad Jawed Bilwani expressed his profound concern over what he described as a significant administrative lapse on the part of the Inland Revenue Service (IRS). He stressed that this sudden classification of compliant taxpayers as “non-active” is not only unjust but also detrimental to the business community, especially considering that the delay in filing was a direct consequence of officially granted extensions.
“Disappointing and Damaging” Inconsistency
“It is highly disappointing that despite the FBR’s own extension of the filing deadline, numerous compliant taxpayers are being unfairly penalized for circumstances entirely beyond their control,” stated Bilwani. “Such a glaring inconsistency in the enforcement of tax regulations is causing immense distress among businesses and is actively eroding the already fragile trust in the country’s tax system.”
System Overwhelmed by Complex New Requirements
According to the KCCI, the FBR’s recent decisions strongly suggest that the current tax infrastructure is operating under immense pressure. The chamber highlighted that the recent introduction of complex new requirements in sales tax returns – including mandatory eight-digit Harmonized System (H.S.) codes, strict unit measurements, and the addition of new annexures such as ‘H-1’, ‘J’, and ‘C-1’ – has overwhelmed both the electronic system and the taxpayers attempting to comply.
Challenges for Local Manufacturers
Bilwani specifically pointed out that these abrupt changes disproportionately impact local manufacturers, many of whom are struggling to accurately identify and apply the correct H.S. codes to their diverse range of products. “While imported goods come with clear Goods Declarations that include these codes, domestic producers are often left to make educated guesses,” he explained. “The fact that the same product can be listed under different H.S. codes by various suppliers only exacerbates the existing confusion and inconsistencies.”
KCCI Proposes User-Friendly Solutions
To mitigate these challenges, the KCCI proposed a practical solution: allowing taxpayers to initially describe their goods within the system, with the system then automatically suggesting the most appropriate H.S. code. Bilwani argued that this approach would significantly reduce instances of misclassification and contribute to the standardization of entries, ultimately making compliance a much more manageable process for businesses.
The KCCI President also criticized the system’s rigid limitations on unit measurement inputs, questioning the restriction to kilograms only. He suggested that implementing a simple dropdown menu offering a range of standard units would greatly simplify data entry and minimize the occurrence of preventable rejection errors.
Furthermore, Bilwani raised concerns about the mid-year and abrupt implementation of new annexures without adequate guidance or educational support for taxpayers. He argued that annex ‘J’ (concerning production data) and annex ‘H-1’ (related to stock reporting by non-manufacturers) should have been introduced gradually, accompanied by comprehensive awareness sessions to properly educate taxpayers before their strict enforcement.
Demand for Immediate Correction and Business-Friendly Approach
The KCCI has urgently demanded an immediate correction of the FBR’s system to accurately reflect the officially extended deadlines for filing. The chamber further urged the FBR to adopt a more business-friendly and technology-oriented approach to tax administration. “Punishing taxpayers who are actively trying to comply, especially when the delays are due to officially sanctioned extensions, completely defeats the very purpose of tax reforms,” Bilwani asserted. He concluded by emphasizing the critical need for the FBR to engage in meaningful dialogue with the KCCI and other relevant stakeholders to ensure clarity, consistency, and fundamental fairness for all taxpayers within the system.
