ISLAMABAD: The Federal Board of Revenue (FBR) has formally integrated the procedure for sales tax adjustment against supplies made to unregistered buyers into its automated system, offering significant relief to the business community.
Through an official letter issued on February 17, 2025, the FBR directed all Chief Commissioners Inland Revenue (LTOs, MTO, CTOs, and RTOs) to implement the revised mechanism.
Under Section 9 of the Sales Tax Act, 1990 and Rule 20 of the Sales Tax Rules, 2006, taxpayers were already allowed to claim sales tax adjustments through credit notes in cases where supplies to unregistered buyers were returned.
However, due to system restrictions introduced after reports of misuse through fake credit notes, the facility had been curtailed. Taxpayers were required to obtain case-by-case approval from the Commissioner Inland Revenue, and matters were often referred to the Board, causing delays and cash flow pressures.
New Automated Procedure
The FBR has now provided a dedicated interface within the IRIS system, enabling:
Direct scrutiny and approval by the Commissioner Inland Revenue
Elimination of mandatory referral to the Board
Faster processing under an automated workflow
Impact on the Business Community
Tax experts believe the reform will:
Accelerate sales return adjustment processing
Improve working capital management
Reduce unnecessary bureaucratic hurdles
Maintain legal transparency and compliance safeguards
Experts describe the development as a balanced approach between business facilitation and revenue protection. However, taxpayers are advised to issue properly documented credit notes and ensure accurate reporting within IRIS to avoid discrepancies.
The facility is expected to particularly benefit companies supplying goods to retailers and open-market customers who are not registered for sales tax.
