KARACHI: The Karachi Tax Bar Association (KTBA) has formally raised concerns regarding the Federal Board of Revenue’s recent mandate requiring HS Codes and standardised Units of Measure (UoM) in sales tax returns.
In a letter addressed to FBR Chairman Rashid Mahmood Langrial, KTBA highlighted what they describe as “significant challenges for taxpayers and tax consultants alike” resulting from these new requirements.
The letter pointed out that the HS Codes were originally developed as a five-digit system for international trade purposes. The association argued that extending this to eight digits for local trading is “incomprehensible and impractical” and potentially inconsistent with the Sales Tax Act, 1990.
“As per the Sales Tax Act, 1990 & relevant rules, the requirement for declaring HS Codes in tax returns or invoices is not explicitly provided for,” the letter stated, suggesting that the FBR’s implementation lacks clear legislative backing.
Furthermore the KTBA highlighted the FBR’s mandate to use kilograms as the standard UoM in sales tax returns for both imports and local supply of goods providing several examples illustrating the practical difficulties:
Cotton T-Shirts: Imported in kg/piece but sold locally in piece/dozen.
Mobile Phones: Imported in box units but sold locally per piece.
Industrial Paint: Imported in gallons but sold locally in litre/kg.
The tax bar has proposed several solutions, including:
Restricting HS Codes requirement to five digits to reduce compliance burdens.
Allowing flexibility in UoM declarations based on industry standards.
Restricting HS Codes in subsequent supplies of finished goods.
Prioritising “Description of Goods” over HS Codes for taxation purposes
Making Annexure-H1 for stock position declaration operational in online systems.
Updating all Schedules under the Sales Tax Act to reflect relevant HS Codes.
Meanwhile KTBA’s President Ali Rahim expressed his willingness for further discussion, stating: “they remain confident that KTBA’s recommendations would lead to a more balanced and effective system for both the FBR and taxpayers.”
Copyright Business Recorder, 2025
