KATI Urges Phased Implementation of New Sales Tax Return Forms to Protect SMEs

Karachi: The President of the Korangi Association ofb Trade and Industry (KATI), Junaid Naqi, has
expressed serious concerns over the Federal Board of Revenue’s (FBR) introduction of new annexures J,
H1, and C1 within the monthly sales tax return, warning that an abrupt rollout could create significant
operational hurdles for small and medium-sized enterprises (SMEs).
Naqi acknowledged that the FBR’s goal of enhancing transparency is valid, but criticized the lack of
advance preparation and support. “Documenting the supply chain is a national imperative,” he said.
“However, most SMEs still lack modern digital infrastructure. Demanding real-time stock balances, NTN
details of buyers and suppliers, and costing methods from them is unrealistic and unfair.”
He noted that the new return format has led to increased accountant fees and consumed valuable
management time, diverting focus from core business activities. “Not only is compliance becoming more
expensive, but the time and effort required is hampering productivity,” he added.
Naqi also voiced concerns over data security, pointing out that storing sensitive commercial data, such
as prices and inventory on FBR’s centralized servers raises fears of data leaks and competitive harm.
“We’ve seen technical issues in the past; any breach of this system could be catastrophic for
businesses,” he said.
He further criticized the technical reliability of FBR’s IRIS portal, which has already seen multiple
deadline extensions for the February and March tax cycles. “This indicates that the system is not yet
equipped to handle increased data volumes,” he explained.
A particularly troubling issue, he added, is the allowance for auditors to challenge declared inventory
costing methods, such as FIFO or LIFO, which could create legal complications and uncertainty during
audits.
Naqi strongly recommended that the FBR adopt a phased implementation plan. He called for joint
training sessions with trade bodies like KATI and the Karachi Chamber of Commerce, and the publication
of simple Urdu-language guides to assist businesses in understanding the new requirements.
He urged the FBR to grant an 18-month grace period during which late or incorrect annexures would not
incur penalties, allowing businesses time to adapt without fear of financial punishment. He also
proposed the introduction of a dedicated help desk and a system-status dashboard on the IRIS portal for
real-time support.
Importantly, Naqi recommended giving each taxpayer the option to lock in their chosen inventory
costing method, FIFO, LIFO, or Weighted Average for at least three years, reducing audit risks and
aligning with international accounting standards.
KATI President reaffirmed the association’s support for broadening the tax base and increasing
transparency. “KATI fully supports reform efforts, provided they do not disrupt business continuity,”
Naqi said. “We are ready to work closely with the government, but reforms must be implemented with
input from the industrial community to ensure sustainable economic progress.”