Islamabad – The Federal Board of Revenue (FBR) of Pakistan introduced significant changes to the sales tax return filing process with the issuance of Statutory Regulatory Order (SRO) 55 on January 24, 2025. This SRO mandates the use of two new annexures, Annexure J and Annexure A1, for specific categories of taxpayers. However, as of February 17, 2025, with the deadline for January returns is upon us, these updated annexures are still not available on the FBR’s online portal, creating widespread confusion and uncertainty among taxpayers.
The newly introduced annexures are intended to enhance transparency and provide a more detailed breakdown of sales and stock information. While SRO 55 is in effect from January 24th, its practical implementation on the IRIS portal remains pending, leaving taxpayers in a quandary about how to proceed with their return filings.
New Annexures: J and A1 – Who Needs to File What?
According to SRO 55, two new annexures have been introduced:
- Annexure J (Modified) – For Manufacturers: This annexure is applicable to manufacturers who produce goods and supply them within Pakistan. While manufacturers were already filing Annexure J, the new SRO brings modifications to its format and required information.
- Annexure A1 (New) – For Commercial Importers, Distributors, and Wholesalers: This is a completely new annexure specifically designed for commercial importers, distributors, and wholesalers who deal in taxable finished goods. It’s important to note that this new annexure does not apply to retailers.
Portal Update Delay and Taxpayer Concerns:
Despite the SRO being issued on January 24th, as of today, February 17th, 2025, these updated annexures are not yet implemented on the FBR’s IRIS portal. This delay has caused considerable confusion and raised several questions among taxpayers:
- Should returns be filed in the old format?
- Is it necessary to request an extension due to the portal delay?
- If returns are filed in the old format, will there be repercussions or notices from the FBR once the new annexures are implemented?
This situation is not unprecedented. The FBR has a history of issuing regulations and SROs, with the corresponding changes on the IRIS portal often lagging behind. A prime example is the National Sales Tax Return, which was envisioned years ago to be a centralized portal for all provinces. However, to date, full provincial integration remains incomplete, and taxpayers still often need to file returns at different provincial levels.
Understanding the New Annexure Formats:
Let’s delve into the details of what these new annexures entail:
Annexure J (For Manufacturers – Modified Format):
The modified Annexure J for manufacturers aims to capture a more comprehensive view of production and stock movement. The current Annexure J available on the portal lacks detailed quantity movement. The new format requires manufacturers to provide the following information:
- HS Code and Description of Goods: Detailed product identification.
- Opening Stock: Quantity and Value of opening stock at the beginning of the tax period.
- Quantity Produced: Quantity and value of goods manufactured during the tax period. This tracks the transition of raw materials into finished goods.
- Sales Details (Linked to Annexure C): Breakdown of sales, linking to the sales data declared in Annexure C:
- Local Sales: Quantity and value of local sales, including both exempt and taxable sales.
- Export Sales: Quantity and value of export sales, shown separately.
- Closing Balance: Quantity and total value of closing stock at the end of the tax period.
This new format introduces quantity tracking, providing a clear movement of stock throughout the tax period – from opening stock to production, sales, and finally, closing stock. This is a significant enhancement compared to the previous format which primarily focused on production capacity and value without detailed stock movement.
Annexure A1 (For Commercial Importers, Distributors, and Wholesalers – New Annexure):
Annexure A1 is designed for commercial importers, distributors, and wholesalers dealing in taxable goods. This new annexure aims to bring more transparency to the trading activities of these businesses. The required details in Annexure A1 are as follows:
- Item Details: Description of goods traded.
- Opening Stock: Quantity and value of opening stock.
- Purchases/Imports: Quantity and value of stock purchased locally or imported during the period.
- Sales Details:
- Local Taxable Sales: Quantity and value of local taxable sales.
- Exempt Sales: Quantity and value of exempt sales.
- Zero-Rated/Export Sales: Quantity and value of zero-rated supplies and exports.
- Closing Balance: Quantity and value of closing stock.
The current Annexure H is used for refund claims and includes stock statements, sharing some similarities with Annexure A1 in terms of tracking stock movement. However, Annexure A1 is designed for broader transparency, allowing the FBR to analyze the entire trading cycle – from purchases/imports to sales and stock levels. This will enable the FBR to identify discrepancies, verify the authenticity of transactions, and potentially detect instances of fake invoicing and undue input tax credit claims without corresponding output supplies.
Should You File Your Sales Tax Return?
Given the imminent deadline and the unavailability of the updated annexures on the portal, the key question is whether taxpayers should file their sales tax returns. The answer is a definitive yes, file your return on time.
The portal update delay is attributable to the FBR, not the taxpayers. Taxpayers are obligated to adhere to the statutory deadlines for return filing. Therefore, it is advisable to file sales tax returns using the existing format and annexures currently available on the IRIS portal, before the due date.
Filing returns on time using the currently available format will demonstrate compliance with the deadline. It is highly unlikely that the FBR will issue penalties or non-compliance notices for filing returns in the old format when the updated annexures were not made available on the portal by their own accord.
Karachi Tax Bar Association Takes Action:
Recognizing the predicament faced by taxpayers, the Karachi Tax Bar Association (KTBA) has formally addressed the FBR. In a recent letter, the KTBA highlighted the non-implementation of Annexure A1 and Annexure J on the IRIS portal for the January 2025 tax period. The association emphasized the confusion and difficulties faced by taxpayers in filing accurate returns due to this unavailability.
The KTBA has urged the FBR to grant a two-month extension for the implementation of these new annexures, proposing an extended deadline up to the filing of the March 2025 returns (due by April 18th). This request for an extension aims to provide taxpayers with sufficient time to understand and comply with the new requirements once the portal is updated.
Proactive Steps for Taxpayers:
For taxpayers seeking to further protect their position, especially in anticipation of potential future queries from the FBR, they can proactively take the following step:
- Send a Letter to FBR: Taxpayers can send a letter to the FBR, referencing the KTBA’s letter and SRO 55, explaining the unavailability of the updated annexures on the portal and stating their intention to file returns using the existing format within the due date to avoid penalties for late filing.
