The 8 June killing of Sarfaraz Shah was filmed by a cameraman and broadcast on Pakistani television, causing anger and revulsion across the country.
He could be seen pleading for his life before being shot twice by the Rangers.
It is rare for the security forces to be in the dock over civilian deaths. The seven men deny all the charges.
The courts have already ordered the removal of the officer in charge of the paramilitary force.
'Self-defence'"The court has formally framed charges of murder and terrorism against all the accused," public prosecutor Mohammad Khan Buriro told reporters.
The BBC Urdu reporter in Karachi, Riaz Sohail, says Mr Buriro told journalists that he would be calling 46 witnesses in the case.
The accused pleaded not guilty and will contest the charges.
A defence lawyer, Naimatullah Randhawa, said the case does not fall under the anti-terrorism law and therefore an anti-terrorism court was not competent to hear it.
"The accused persons in this case are not terrorists; they are soldiers and they fired in self-defence," he said.
The formal indictment had been repeatedly delayed to allow the accused time to hire lawyers. A security guard from the park where Mr Shah, 19, was killed is also charged.
'Pleading for his life'The strongest piece of evidence is the video footage recorded by a cameraman for Awaz (The Voice) TV, a local Pakistani channel.
Sarfaraz Shah (left) was detained at gunpoint and then shotThe footage showed Sarfaraz Shah, wearing a black T-shirt, being dragged by his hair in a public park by a man in plain clothes and pushed towards a group of Sindh Rangers who are in uniform and armed.
He pleads for his life as one of the Rangers points a gun at his neck.
A little later a Ranger shoots him twice at close range, hitting him in the thigh.
The young man is seen writhing on the ground, bleeding heavily and begging for help. The paramilitaries did nothing to help him and he died of his injuries.
The Rangers say he was caught trying to rob someone. His family denies this.
Police said they recovered a fake pistol, which Mr Shah was carrying, as well as the two bullets which killed him.
The video prompted further widespread criticism of the Pakistani security establishment, which is already under fire for the recent killing of a journalist, Saleem Shahzad.
Journalists, politicians and rights activists have accused the army's intelligence service, the ISI, of the murder, a charge which the ISI denies.
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