Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Jawed Bilwani on Monday expressed serious concern over the faulty classification of taxpayers as “non-active” by the Inland Revenue Service (IRS), despite the Federal Board of Revenue (FBR) officially extending the sales tax return filing deadlines for February and March 2025.
“It is deeply troubling that numerous taxpayers are being unfairly labeled as inactive solely due to delays in filing returns for two consecutive periods, even though official extensions were granted,” he said. “This is causing unnecessary difficulties for honest taxpayers who are already trying to comply with the ever-changing regulatory environment,” he said.
Underscoring that the sales tax return filing system is under immense strain, largely due to a series of recent and abrupt changes, he said the deadline extension indicated the system’s flaws. “Yet, instead of facilitating the taxpayers, they are being penalized, which is counterproductive,” he emphasized.
Commenting on the technical difficulties faced by taxpayers, Bilwani noted that the FBR has recently introduced mandatory requirements such as eight-digit Harmonized System (HS) codes, precise units of measurement, and several new annexures in sales tax returns. Noting that imported items could be easily linked with HS codes from Goods Declarations, manufacturers of local goods were facing major challenges. “Many local producers are simply unaware of the correct HS codes for their products. The same item being assigned different codes by different suppliers is creating unnecessary confusion and inconsistency,” he said.
Urging the FBR to reconsider this approach, the KCCI president suggested the system allow taxpayers to describe the item and then automatically assign the appropriate code. “This would reduce confusion and improve standardization,” he said.
Highlighting another technical limitation, Bilwani criticized the restriction of unit measurements to kilograms only. “This is highly impractical. A dropdown menu should offer all standard units of measurement. If needed, the tax department can always request clarification at a later stage instead of enforcing rigid input criteria,” he said.
On the sudden implementation of new annexures, he advised against abruptly enforcing Annex ‘J’ concerning production data and Annex ‘H-1’ related to stock reporting by non-manufacturers. Rather, he suggested phasing them in with proper educational support through seminars and workshops.
Bilwani also highlighted the inconsistency between the legal status of filing extensions and the current behavior of the IRS system. “It is legally inappropriate to declare a taxpayer inactive for failing to file returns during months for which official extensions have already been granted. This mismatch between policy and system enforcement is deeply unfair and must be rectified immediately,” he said.
The KCCI president urged the FBR to adopt a more pragmatic, technology-driven, and taxpayer-friendly approach. “The current system creates undue hardship for compliant businesses. It is essential that reforms are introduced with proper planning, consultation, and support mechanisms to ensure fairness and ease of doing business,” he stressed.