ISLAMABAD: The Federal Board of Revenue (FBR) has introduced sweeping changes to the Sales Tax Act aimed at strengthening anti-fraud measures and enhancing transparency in enforcement, as outlined in the Finance Bill 2025, currently under debate in the National Assembly and active business forums.
The bill tightens existing provisions under Section 37A of the Sales Tax Act by requiring a prior inquiry and approval from the Commissioner Inland Revenue (CIR) before any arrest can be made. Previously, Assistant Commissioners had the power to arrest directly. Post-inquiry, the CIR must authorize investigation officers to assume police-like powers per the CrPC 1898—but only if there's a belief that tax fraud may have occurred.
To curb misuse, cases of malafide arrests will be reviewed by the Chief Commissioner through a fact-finding procedure. Senate lawmakers are also urging the establishment of a minimum threshold (proposed at Rs 10 million) for arrest allowance, and proposing that approval come from a three-member FBR committee, ensuring checks and balances.
Acknowledging ongoing concerns, FBR Chairman Rashid Mahmood Langrial has expressed openness to refining these measures—suggesting, for instance, multiple senior officer sign-offs before an arrest. In response to PM Shehbaz Sharif’s direction, a high-level committee led by the Finance Minister, alongside law and revenue officials, will review the amendments and propose additional safeguards within three days.
The committee’s mandate includes protecting compliant taxpayers, preventing authority abuse, and balancing effective fraud deterrence with legitimate business operations.
The FBR argues that these enhanced arrest powers are necessary in light of recent scandals involving high-level tax fraud, including one implicating a former senator and a customs official, uncovered during Senate committee proceedings. With potential penalties of up to 10 years imprisonment depending on fraud size, these reforms aim to close loopholes and reinforce compliance .
While businesses welcome greater transparency, some fear excessive enforcement thresholds may stifle normal trade. The proposed committee and thresholds are designed to resolve these concerns by allowing both effective action and due process .
