KCCI demands reversal of sales tax amendments

KARACHI: The Karachi Chamber of Commerce & Industry (KCCI) on Friday expressed strong disapproval of the recent amendments to the Sales Tax Rules 2006, as per SRO.350(I)/2024, arguing that the new rules introduce unwarranted constraints on various business entities without proper consultation, potentially harming compliant businesses across various sectors.

Iftikhar Ahmed Sheikh, president of KCCI, in a communication to Malik Amjed Zubair Tiwana, chairman of the Federal Board of Revenue (FBR), emphasized the need for a critical review of the amendments.

Sheikh said that Rule 5, Sub-rule (2), requires the registered individual, AOPs, and a company having only one shareholder to submit a balance sheet indicating the amount of business capital with corresponding assets in the bank, which would create unnecessary complications for commercial importers, trading houses, and registered persons on ATL because all such entities already submit their balance sheets, bank statements, and wealth statements to the FBR at the time of filing their income tax returns, hence the FBR already has the required data.

He further noted that the amendment in Clause C, Sub-rule (4), requires the owners of the above-mentioned entities to visit a NADRA Sahulat center for biometric verification. “This is against the policy of ease of doing business and an unnecessary inconvenience. This condition should not be applied to regular filers of sales tax and income tax returns who are on ATL.”

Sheikh said an amendment in Rule 18, Sub-rule (1), restricts the volume of sales to a maximum of five times the business capital of an entity, but this rule has been made without an understanding of business practices and ground realities.

“For instance, in the case of commercial importers of raw materials, intermediate goods, and finished goods, the suppliers extend credit by up to 90, 120, and even 180 days, and the importers make payments at the maturity date after selling the goods," he said.

"Likewise, commercial exporters also import raw materials and intermediate goods on supplier’s credit. The volume of such imports and sales may far exceed five times the business capital,” Sheikh said, adding that the amendment may, therefore, be removed from the sales tax rules because it only creates a hurdle in business and is counter-productive to growth.

The KCCI chief was of the opinion that commercial importers of raw material support cottage and small industries who do not have access to credit facilities with banks and procure raw materials from importers on credit. "The justification provided for the amendments made under SRO.350 was to curtail fake and flying invoices, whereas these measures will be self-defeating," Sheikh said.