The question turns on a hidden ambiguity: a "sin" can mean the actual human act, or it can mean the blame and liability attached to that act. Islam says Allah creates all things, while the servant truly chooses and earns his deeds, so forgiveness is perfectly meaningful.
Why the argument sounds strong
The argument, stated at its best, is this: forgiveness is for something real. If sins are not created at all, then what exactly is being forgiven? And if they exist outside Allah's creation, then there would be something in reality beyond His lordship. The Quran repeatedly rejects that:
Allah is the Creator of all things, and He is, over all things, Disposer of affairs.
Quran 39:62
Allah created you and what you do.
Quran 37:96
So the proponent says: either sins are created by Allah, or they are unreal, or they exist independently of Allah. The last two options are impossible. Therefore sins must be created, and forgiveness is Allah pardoning a real deed committed by a real servant.
What a "sin" is - act, choice, and blame
The strongest answer is to separate two meanings that often get mixed together. The outward act - the movement of a hand, the speaking of words, the forming of an intention, the occurrence of a deed in time - is created by Allah. Nothing escapes His will, knowledge, power, or creation.
But the moral quality "sin" is not a separate object floating in the universe. It is the act as related to Allah's command: this act was prohibited, the servant knowingly chose it, and therefore blame attached to him. In that sense, sin is a legal and moral description of a created act, not a rival created substance.
This is why the Quran speaks both ways. Allah creates all things, yet human beings are truly accountable for what they earn:
For it is what it earned, and against it is what it earned.
Quran 2:286
And your Lord does injustice to no one.
Quran 18:49
The classical scholars expressed this by saying that Allah creates the servants and their acts, while the servants "acquire" their acts through their will and choice. This preserves both truths: Allah is the sole Creator, and man is not a helpless stone being punished for no reason.
How forgiveness works
Forgiveness does not mean Allah needs to erase an independent object called "sin" from existence. It means He removes guilt, waives punishment, covers the servant's shame, and accepts repentance. The deed happened, and Allah knew it before it happened; yet He may pardon its consequence by His mercy.
Say, "O My servants who have transgressed against themselves, do not despair of the mercy of Allah. Indeed, Allah forgives all sins."
Quran 39:53
When Allah decreed the creation, He wrote in His Book which is with Him above the Throne: "My mercy prevails over My anger."
Sahih al-Bukhari and Sahih Muslim
So the sinner is forgiven not because the sin was imaginary, but because Allah, the Owner of the command and the Judge of the servant, chooses to pardon.
What the argument proves - and what it does not
The argument does establish that sins cannot be outside Allah's creation or power. It also exposes a weak way of speaking, as if human evil somehow creates itself independently of Allah.
But it does not prove that Allah is morally blameworthy for sin, nor that humans are coerced. Creation is not the same as approval. Allah creates disbelief but does not love it; He creates oppression but forbids it; He creates the servant's capacity and choice, then judges the servant with perfect justice.
The balanced answer is simple: sins are real created acts, sinful because servants choose them against Allah's command, and forgivable because Allah is the Merciful Judge who may erase their liability.