KATI Calls for Gradual Rollout of New Tax Forms to Protect Small Businesses

Karachi: The President of the Korangi Association of Trade and Industry (KATI), Junaid Naqi, has voiced significant concerns regarding the Federal Board of Revenue’s (FBR) recent introduction of new annexures J, H1, and C1 within the monthly sales tax return. Naqi warns that an immediate implementation could lead to major operational challenges for small and medium-sized enterprises (SMEs).

While acknowledging the FBR’s intent to enhance transparency, Naqi criticized the lack of preparatory measures. He emphasized that although documenting the supply chain is crucial, many SMEs are not equipped with the necessary digital infrastructure. Requiring real-time stock balances and detailed buyer and supplier information is deemed impractical.

Naqi also highlighted the increased costs for accountants and the diversion of management focus from essential business activities. The new tax return format, according to him, is both costly and time-consuming, impacting productivity adversely.

Concerns over data security were also raised, with Naqi pointing out the risks associated with storing sensitive business information on FBR’s centralized servers. He noted previous technical issues with the FBR’s IRIS portal, suggesting that the system is not yet ready to manage increased data volumes.

Additionally, Naqi expressed apprehension about auditors challenging inventory costing methods during audits, which could lead to legal complications. He proposed that the FBR implement a phased approach, including joint training sessions with trade bodies and simplified Urdu-language guides for businesses.

Naqi urged for an 18-month grace period where penalties for late or incorrect annexures would be waived, allowing businesses to adapt. He also suggested a dedicated help desk and real-time system support on the IRIS portal.

Moreover, Naqi recommended allowing taxpayers to lock in their chosen inventory costing method for three years, aligning with international standards. He reaffirmed KATI’s support for tax reforms aimed at increasing transparency, provided they do not disrupt business continuity. Naqi emphasized the need for reforms to be conducted with input from the industrial community to ensure sustainable economic progress.