What are the Different Annexures in Sales Tax Return Form

Filing sales tax returns requires businesses to meticulously report their transactions through various annexures attached to the main return form. These annexures cater to different aspects of business operations like purchases, sales, imports, exports, and stock management.

The Federal Board of Revenue (FBR) periodically updates these requirements, making it crucial for businesses to stay informed to ensure compliance. Recent changes, particularly in early and mid-2025, have introduced new reporting formats and data requirements.

Core Transaction Annexures:

• Annex A: Purchases: This annexure remains fundamental for reporting all domestic taxable purchases made during the tax period. It requires details like the supplier’s name and registration number, the value of purchases, and the sales tax paid (input tax). Accurate reporting here is vital for claiming input tax adjustments.
• Annex B: Imports: Used to declare goods imported during the tax period. Information required includes supplier details, description of goods, value, and the sales tax paid at the import stage.
• Annex C: Sales: This is the primary annexure for reporting domestic taxable sales. It traditionally requires details of the customer (name and registration number), the value of sales made, and the sales tax collected (output tax). Note: See Annex C1 below for specific new requirements regarding payment reporting.
• Annex D: Exports: Details of goods exported during the tax period are reported here. This includes exporter registration details, description and value of goods exported, and relevant shipping/export documentation references. Exports are generally zero-rated, but reporting is mandatory.
• Annex E: Federal Excise: Businesses dealing with goods or services subject to Federal Excise Duty (FED) use this annexure to report their FED liability and related sales tax calculations for the period.

Stock and Production Annexures:

Significant changes were introduced via SRO 55(I)/2025, effective from the January 2025 tax period, impacting how stock and production are reported:

• Annex F: Goods Declaration: Historically used for reporting goods in stock or manufactured. Its specific function may overlap or be refined by the more detailed requirements in the revised Annex J and new Annex H1.
• Annex H: Stock Statement: Previously the standard annexure for reporting closing stock. While potentially still relevant for some, its role for many businesses is now complemented or replaced by the more detailed Annex H1.
• Annex H1 (New – Mandatory from Jan 2025): Introduced by SRO 55(I)/2025, this annexure is now mandatory for all registered commercial importers, distributors, and wholesalers. It requires detailed, itemized stock information, including:
  • Description of Goods (with HS Code and Unit of Measurement)
  • Opening Balance (Quantity & Value)
  • Goods Purchased / Imported during the month (Quantity & Value)
  • Goods Supplied during the month (Quantity & Value)
  • Closing Balance (Quantity & Value)
• Annex J (Revised – Mandatory from Jan 2025): Also updated by SRO 55(I)/2025, this annexure is now mandatory for all registered manufacturers. It requires detailed reporting on production activities, including:
  • Description of Goods Manufactured (with HS Code and Unit of Measurement)
  • Opening Stock (Quantity)
  • Goods Manufactured/Produced (Quantity)
  • Goods Supplied (Quantity)
  • Closing Stock (Quantity)
• Annex K: Steel Production: This annexure remains specific to businesses involved in steel production, detailing the quantity and value of steel produced and the corresponding sales tax.

Implementation Note: Reports from early 2025 indicated that some businesses, represented by bodies like the Karachi Tax Bar Association (KTBA), faced initial challenges accessing and completing the revised Annex J and new Annex H1 in the FBR’s online system when these changes first took effect.

What is Annexure H1?

Annexure H1 mandates a comprehensive declaration of stock movements. Businesses subject to this requirement must now provide detailed information including:

• Product Details: HS Codes, descriptions, and units of measurement for all stock items.
• Tax Rates: Applicable sales tax rates for each item.
• Stock Flow: Figures for Opening Stock, Purchases (local and imported), Supplies (broken down into taxable, exempt, and zero-rated), and the resulting Closing Balance for the tax period.

Four Pillars of Accurate Annexure H1 Preparation

Based on the guidance provided, meticulous preparation is key. Focus on these four essential points:

1. Establish Accurate Opening Stock: Your opening stock for the March 2025 Annexure H1 should logically flow from your previously declared stock. This involves taking the stock figure from your last annual income tax return (for the year ending June 2024) and accurately tracking monthly purchases and consumption from July 2024 to February 2025 to arrive at the correct opening balance for March.

2. Use Correct Purchase Data (at Cost): The purchase figures reported in Annexure H1 should strictly correspond to the data declared in Annexure A (now Domestic Purchase Invoice – DPI) of your sales tax return. Crucially, these purchases must be valued at their cost price, excluding any sales profit margin.
3. Report Consumption Value Correctly (at Cost): Similarly, when reporting supplies (consumption), use the cost value of the goods sold. It’s vital not to include your profit margin in this figure. Furthermore, for valuation purposes, stick to the original purchase cost; avoid adding subsequent overheads like labor or utilities incurred during storage or minor processing unless directly part of the acquisition cost recognized under accounting standards. The basic formula remains: Opening Stock + Purchases – Consumption = Closing Stock.
4. Ensure Software and Record Alignment: Double-check that the data generated for Annexure H1 aligns perfectly with your internal inventory management or accounting software records. Consistency across all platforms is essential to avoid mismatches between your monthly sales tax filings and your annual income tax declarations.

New Sales & Payment Reporting:

• Annex C1 (New – Mandatory from April 8, 2025): This recently introduced annexure adds a significant layer to sales reporting, focusing specifically on the payments received against sales. Key aspects include:
  • Payment-Based Reporting: Unlike Annex C which focuses on invoiced sales, Annex C1 requires reporting based on payments actually received within the tax month, irrespective of the original invoice date. This is crucial for tracking payment realization, especially for credit sales.
  • Payment Method Emphasis: The system appears to favor traceable payment methods like digital transfers, checks, or pay orders. Reporting purely cash transactions may present challenges, potentially encouraging businesses to adopt digital payment systems.
  • Handling Multiple HS Codes: For single invoices containing items with different Harmonized System (HS) codes, it’s advisable to issue separate invoices for items under distinct HS codes to simplify Annex C1 reporting.
  • Detailed Data: Requires comprehensive tracking of customer information (including registration status), specific product HS codes, and precise payment details (amount, date, method).

Challenges and Adaptation:

The introduction of Annex C1, alongside the earlier changes to Annex H1 and J, signifies a move towards more granular, digitized tax reporting by the FBR. Businesses face several challenges:

1. Data Management: Capturing the detailed information required (HS codes, payment dates/methods, itemized stock) necessitates robust record-keeping.
2. Software Updates: Existing accounting and ERP systems may need significant modification or upgrades to handle the specific data fields and reporting logic of Annex C1, H1, and the revised J.
3. Process Adjustments: Invoicing practices (e.g., separating HS codes) and payment tracking mechanisms need review and potential overhaul.
4. Cash Transactions: Businesses heavily reliant on cash may find compliance with Annex C1 more complex.
5. Sector Impact: Retailers and wholesalers, often dealing with high transaction volumes and varied stock, might find adapting to Annex H1 and C1 particularly demanding.

Staying compliant with sales tax regulations requires a thorough understanding of the various annexures and their specific requirements, especially given recent updates like Annex C1, Annex H1, and the revised Annex J. Businesses must ensure they have the systems and processes in place to accurately capture and report the necessary data.