Federal Tax Ombudsman (FTO) Pakistan has directed the FBR Immediate Clarification on Sales Tax of Basic Bakery Items

Islamabad 11-03-2025: In a recent ruling, the Federal Tax Ombudsman (FTO) Pakistan, Mr. Dr. Asif Mahmood Jah Hon’ble Federal Tax Ombudsman (FTO), highlighted maladministration by the Federal Board of Revenue (FBR) due to its failure to issue necessary clarifications regarding the sales tax treatment of basic bakery items, including buns, rusks, raisin buns, and sheermal.

The Complaint was initiated by an advocate who sought clarification following the Finance Act 2024 amendment, shifting these bakery items from a tax-exempt category under the Sixth Schedule to a reduced-rate tax category under the Eighth Schedule of the Sales Tax Act, 1990. Despite multiple requests directed to senior officials, including Member Sales Tax Policy and Chief Commissioner Inland Revenue (CCIR), RTO-1 Karachi, the department failed to respond, creating ambiguity and compliance issues for taxpayers.

The Federal Tax Ombudsman (FTO) Pakistan held that such non-responsiveness by the FBR clearly amounts to maladministration under Section 2(3)(ii) of the Federal Tax Ombudsman Ordinance, 2000. The ruling emphasized the necessity of clear tax guidance, especially when minor physical differences in bakery products, which share identical manufacturing processes, lead to confusion and differential tax treatments.

The judgment also incorporated socio-economic considerations, citing a World Bank report highlighting Pakistan’s persistent high poverty rates. It noted the vital role that affordable bakery items such as buns and rusks play in the diet of economically vulnerable populations and recommended reconsideration of their taxation in future budgets.

Consequently, the Federal Tax Ombudsman (FTO) Pakistan has directed the FBR to provide immediate clarification regarding taxability and reporting methods for these bakery items. Furthermore, it has recommended examining potential exemption of buns and rusks from sales tax in the upcoming budget proposal for 2025, instructing the FBR to submit a compliance report within 30 days.

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