The matter raises a serious possibility that the arrangement may not be a simple case of erroneous data entry, but could represent a carefully devised mechanism whereby tax attributable to an actual electricity consumer is deposited against the record of an unrelated person, thereby enabling the actual consumer to remain outside the tax trail maintained by the tax authorities.

The FTO has directed the Federal Board of Revenue (FBR) to examine the matter comprehensively and determine how the CNIC of an unrelated person came to be associated with the electricity connection and whether the arrangement resulted in tax being incorrectly attributed to that person while the actual consumer escaped corresponding reflection in the tax record.

The Ombudsman has observed that such a mechanism, if established to be deliberate, could have implications beyond the individual complaint. It may indicate a novel method of defeating the tax authorities’ data-matching and monitoring mechanisms by shifting the tax trail of one consumer to the CNIC of another person.

The FBR has accordingly been asked to verify the complete record of the electricity connection, identify the person who actually consumed the electricity, reconcile the tax collected with the corresponding taxpayer record, and examine whether any collusion, manipulation or deliberate misuse of the system was involved.

Copyright Business Recorder, 2026

Addressing at a dinner hosted by the Businessman Panel Progressive (BMPP), Chairman FBR urged businesses community and individual taxpayers to hold detailed consultations with their tax consultants before filing their income tax returns as tax consultants play a vital role in helping clients understand complex tax laws and legally minimise their tax liabilities within the framework of the law.

On the occasion, Saquib Fayyaz Magoon Senior Vice President FPCCI and Chairman BMPP, Khurram Ijaz General Secretary BMPP, Asif Sakhi Vice President FPCCI, Shabbir Mansha Member Supreme Council BMPP, Sham Lal Chairman Pakistan Ginners Association, Khushnood Afta Sheikh and others were also present.

Chairman FBR said that in the past, some taxpayers relied on the assumption that underreporting income or making inaccurate declarations carried a low risk of detection because the FBR lacked the manpower and technological capacity to scrutinise every return.

“However, that assumption is no longer valid as the FBR now has the capability to automatically review every tax return using advanced digital tools,” he informed.

He said that the integration of third-party data has sharply reduced the scope for inaccurate declarations, while use of AI and reforms in the tax system has not only improved administrative processes, the induction of private-sector professionals has significantly strengthened the tax authority’s monitoring capabilities.

Langrial said the transition towards a faceless tax administration has diminished the influence of personal contacts and recommendations that were previously perceived to affect tax matters.

He advised the business community to seek only lawful and technically sound guidance from their tax consultants, cautioning against relying on outdated practices or advice that falls outside the legal framework. “If taxpayers continue to follow old methods during the current filing season, they may face significant and costly financial consequences,” Chairman FBR warned.

Reaffirming the FBR’s commitment to a transparent and technology-driven tax system, he said that the ongoing digital reforms are aimed at strengthening revenue collection and improving the country’s economic stability.

He urged taxpayers to complete their tax affairs transparently and file their returns well before the prescribed deadlines.

Tax consultants and businesses in the past often assumed that the FBR’s limited technological capability and manpower meant there was little chance of being caught for underreporting income or understating tax liabilities. However, with the introduction of AI and the implementation of a faceless tax administration, the system has changed fundamentally, he mentioned.

Chairman FBR said that documenting the economy requires businesses to purchase goods and services only from registered companies and individuals and this would improve transparency in the tax system and help broaden the country’s tax base. He informed that various proposals are under consideration to resolve the issues of tax refund delay aimed to strengthen businesses’ cash flows.

On the occasion, Saquib Fayyaz Magoon said that most of the issues raised by trade bodies have received a positive response and several matters were resolved during the meeting with chairman FBR held on Tuesday in Karachi.

Delays in refunds were a major issued and the chairman has already directed the FBR officials to improve the refund mechanism. He urged the tax authority to introduce a faster refund mechanism for the exporters, arguing that it creates shortage of cash flow and delays force small exporters to absorb refund amounts into their costs, making them less competitive in international markets.

Copyright Business Recorder, 2026

Chairman FBR Rashid Mahmood Langrial during his visit to Karachi held a meeting with the KTBA delegation led by President KTBA Mehmood Bikiya at Customs House Karachi on Thursday.

The delegation raised alarms over ongoing problems with the online return, saying that the FBR portal is scheduled to go offline for two-day system maintenance and that only 50 days remain until the filing deadline. The KTBA delegation urged the board to expedite technical resolutions to prevent a return compliance crisis.

The delegation heavily reiterated its demand for a simplified, system-based refund mechanism for taxes collected under Section 7E over the past three financial years, adding that manual returns revision for Section 7E refunds is an impractical drain on time.

The KTBA delegation urged the FBR Chairman to implement an automated system to ensure rapid processing and the immediate release of stuck refunds. The delegation requested to be taken on board during the faceless system execution phase.

In response, the FBR Chairman agreed to directly connect the KTBA with the specific FBR team actively working on the faceless system.

During the meeting, the KTBA warned that Pakistan’s complex tax compliance environment remains a severe deterrent to foreign direct investment, stressing the need for a more investment-friendly system. The FBR Chairman acknowledged these structural hurdles, assuring the delegation that the board is working on targeted reforms to provide maximum facilitation to foreign investors.

During the meeting, the delegation also commended the FBR Chairman for successfully meeting revenue targets and expressed optimism regarding the FBR’s new Fixed Tax Scheme for small businesses and retailers.

The FBR Chairman emphasized that while the authority is engaging with trade bodies, the direct support of the KTBA remains critical to the scheme’s viability. The Chairman FBR further briefed the delegation on the FBR’s technological modernization to streamline administrative operations.

Alongside President Mahmood Baikiya, the KTBA delegation included Muhammad Zubair, Rehan Siddique, Shamsuddin, Anwar Kashif, and other senior members of the bar.

Copyright Business Recorder, 2026

According to an office order issued by the FBR’s Legal Wing on Friday, the committees have been constituted under Section 133A of the Income Tax Ordinance, 2001, Section 47AAA of the Sales Tax Act, 1990, and Section 34AA of the Federal Excise Act, 2005, along with the relevant rules framed thereunder.

The FBR has established three regional committees covering Islamabad, Lahore and Karachi jurisdictions.

The Islamabad Committee will be headed by former Justice Athar Saeed, with Barrister Saad Buttar and Dr Muhammad Iqbal, Former Member Inland Revenue Policy, FBR, serving as members. The committee will oversee litigation matters relating to Large Taxpayer Office (LTO) Islamabad, RTO Islamabad, RTO Peshawar, RTO Abbottabad and the Directorate General of Intelligence and Investigation (DG I&I), Islamabad.

The Lahore Committee will be chaired by former Justice Khawaja Farooq Saeed, while Mirza Nasar, Advocate Supreme Court, and former FBR Member Shahid Hussain Asad have been appointed as members. Its jurisdiction extends over LTO Lahore, LTO Multan, CTO Lahore and Regional Tax Offices in Lahore-I, Lahore-II, Rawalpindi, Gujranwala, Faisalabad, Multan, Bahawalpur, Sialkot, Sargodha and Sahiwal.

The Karachi Committee will be headed by former Justice Maqbool Baqir. Its members include Munawar Ali Memon and former FBR Member Seema Shakil,. The committee will deal with cases falling under LTO Karachi, CTO-I Karachi, CTO-II Karachi, RTO-I Karachi, RTO-II Karachi, RTO Sukkur, RTO Hyderabad and RTO Quetta.

Under the office order, the committees will examine tax cases and recommend whether references should be filed before the High Courts or petitions and review petitions before the Supreme Court or the Federal Constitutional Court. They will also periodically review pending litigation to determine whether continuation of legal proceedings is warranted in the interest of revenue.

In addition, the committees have been assigned the responsibility of maintaining a database of settled legal issues and judicial precedents to promote consistency in future litigation. They will also identify systemic legal and administrative issues requiring legislative or policy intervention and submit appropriate recommendations to the FBR.

The FBR said that the terms and conditions governing the engagement of chairpersons and members, remuneration, meetings, decision-making and disposal of official assignments will be regulated under the relevant provisions of the Income Tax Ordinance, Sales Tax Act, Federal Excise Act and corresponding rules. The office order has been issued with the approval of the competent authority and has taken immediate effect.

Copyright Business Recorder, 2026

In a letter issued to the chief executives of banks, the FBR’s Regional Tax Office (RTO) Peshawar stated that the Finance Act, 2026 has amended the Income Tax Ordinance, 2001, abolishing the tax exemptions previously available to the erstwhile FATA/ PATA. As a result, income arising in these areas is now taxable in accordance with the applicable provisions of the Ordinance.

The tax authority instructed banks to ensure deduction of withholding tax on profit on debt paid to residents of the erstwhile FATA/PATA under section 151, rent payments made to landlords of bank premises in these areas under section 155 and withholding tax deduction on salary payments under section 149 of the Income Tax Ordinance, 2001.

The FBR urged banks to implement the statutory changes across their branch networks and ensure full compliance with the amended tax regime, adding that its offices would provide any necessary clarification regarding the implementation of the new provisions.

Meanwhile, the FBR has formally notified local government offices in Ex-PATA that, following the Finance Act, 2026, the income tax exemptions have been withdrawn and withholding tax provisions under the Income Tax Ordinance, 2001 are now fully applicable.

Authorities have been directed to immediately begin deducting, depositing, and reporting withholding taxes.

The Office of the Inland Revenue Officer, Unit-03, Mardan Zone has been written to the Tehsil Municipal Officer (TMA), Samarbagh, Lower Dir on the implementation of Withholding Tax Provisions in ex-PATA.

The letter informs the TMA that an FTN (Free Tax Number) has been issued to TMA Samarbagh.

The FTN is to be used for the deduction, collection, deposit, and reporting of withholding taxes under the Income Tax Ordinance, 2001.

Under the Finance Act, 2026, the income tax exemptions previously available to former-PATA areas have been withdrawn.

Consequently, the withholding tax provisions now apply in Ex-PATA, and all withholding agents must deduct applicable withholding taxes; collect and deposit them into the government treasury and report the taxes in accordance with the law.

The TMA is directed to deposit all applicable withholding taxes using its allocated FTN, submit copies of the relevant Computerized Payment Receipts (CPRs) to the Inland Revenue Office, and comply immediately, Mardan Tax Office added.

Copyright Business Recorder, 2026

The FBR has issued four notifications; i.e., SRO.1138 (I)/2026 (income tax); S.R.O1168 (1)/2026 (Federal Excise); SRO.1169 (1)/2026 (Sales Tax) and SRO.1141 (I)/2026 (Customs).

The Independent Case Scrutiny Committees will examine the legal merits of tax cases before references are filed before High Courts or petitions are instituted before the Supreme Court or the Federal Constitutional Court.

According to the procedure, the proposed framework seeks to institutionalise an independent mechanism for scrutinising litigation under tax laws with the objective of ensuring that only legally sustainable cases involving substantial questions of law or significant revenue implications are pursued before superior courts.

The initiative is also intended to improve the quality of tax litigation, minimise avoidable legal disputes, promote consistency in legal positions adopted by the tax department and strengthen overall litigation management within the FBR.

The notification provides for the constitution of three Independent Case Scrutiny Committees with specified territorial jurisdictions. Each committee will comprise a retired judge of the Supreme Court, the Federal Constitutional Court or a High Court as Chairman, an advocate having at least 15 years’ experience in tax and commercial litigation before superior courts, and a senior serving or retired Inland Revenue Service officer in BS-20 or above as the third member.

The committees will examine every case referred to them and determine whether the matter merits filing of a reference before a High Court or a petition before the Supreme Court or the Federal Constitutional Court.

Besides recommending whether litigation should be initiated, the committees will periodically review pending references and petitions to assess whether continuation of litigation remains justified in the interest of revenue. They will also maintain a comprehensive database of settled legal questions and judicial precedents to ensure consistency in future litigation while identifying systemic legal and administrative issues requiring legislative intervention by the government.

Copyright Business Recorder, 2026

In an order issued on complaints filed by Karachi-based exporter M/s Quality Towellers, Federal Tax Ombudsman Zafar Hijazi observed that the FASTER system is unable to differentiate between commercial export Goods Declarations (GDs) and non-commercial sample export GDs.

This results in the system incorrectly raising the objection “GD Not Realized” and diverting the taxpayer’s entire carry-forward refund claim to manual processing instead of deferring only the proportionate amount as required under STGO No. 09 of 2023 and the Sales Tax Act, 1990.

The Ombudsman noted that exporters sending product samples through courier services are particularly affected because such consignments do not require realization of export proceeds and are not eligible for sales tax refunds. However, these declarations are automatically populated in the IRIS sales tax return and cannot effectively be removed, creating unnecessary objections during refund processing.

During the proceedings, Pakistan Revenue Automation Limited (PRAL) informed the FTO that it only receives export GD data from Pakistan Customs through an automated interface and has no legal or technical authority to alter or correct the information.

It maintained that any amendment to Goods Declarations must be made by Pakistan Customs, after which the corrected data would automatically flow into the IRIS system.

The FTO termed the issue a “systemic and hazardous loophole” posing a threat to the export sector and directed FBR’s Inland Revenue and Customs Wings to jointly resolve the matter. It recommended that the Board’s Domain Team prepare a Change Request Form (CRF) in consultation with Customs to modify the FASTER system so it recognizes non-commercial sample export GDs, refrains from raising incorrect objections, and ensures that only the proportionate input tax refund linked to disputed export declarations is deferred.

The Ombudsman further directed that where no refund has been claimed, the system should not defer any amount and ordered FBR to submit a compliance report within 60 days.

Copyright Business Recorder, 2026

In a detailed review order issued by Federal Tax Ombudsman Zafar Hijazi, the FTO observed that tax enforcement actions capable of disrupting business operations have far-reaching commercial consequences, including loss of customers, financial distress, contractual disruptions and damage to business reputation, which may not be reversible even if the taxpayer ultimately succeeds in legal proceedings.

To address the issue, the Ombudsman introduced a new category of complaints titled “Business Continuity Cases,” under which complaints involving suspension of sales tax registration, sealing or locking of business premises, or similar actions affecting lawful business operations will receive the highest institutional priority for investigation and adjudication.

The order directs the chairman FBR to formulate and notify a Special Administrative Protocol governing all administrative actions that may interrupt the continuity of lawful businesses. The proposed protocol should ensure verification of all statutory requirements before action is taken, legally valid service of notices, meaningful opportunities of hearing, recording of reasons, senior-level supervisory approval and periodic review of such actions.

The FTO further recommended that enforcement measures capable of bringing a lawful business to a standstill should ordinarily be treated as measures of last resort, and wherever the law allows more than one course of action, authorities should choose the option that secures tax compliance while causing the least disruption to legitimate business activities.

The directions were issued while deciding a review petition filed by a Karachi-based taxpayer whose sales tax registration had been suspended. The complainant alleged that the suspension was carried out without proper service of notices and without providing an effective opportunity of hearing, resulting in severe commercial losses. During the proceedings, the taxpayer informed the Ombudsman that it had deposited Rs 300,000 under protest to secure restoration of its sales tax registration while reserving its legal rights.

Allowing the review petition, the Ombudsman held that the earlier order had failed to adjudicate the core issue of whether the administrative process leading to suspension of the sales tax registration complied with mandatory legal and procedural safeguards. The order emphasised that the role of the FTO is to examine allegations of maladministration and ensure fairness, legality and procedural discipline in tax administration.

Copyright Business Recorder, 2026

According to an FTO decision, the complainant, retired naval officer Misbahul Islam Syed, challenged the freezing of his bank accounts, including his pension account, after FBR initiated recovery proceedings over an income tax demand of Rs 12.16 million for tax year 2018.

The complainant submitted that the tax demand was created through an assessment order issued under Section 122(1) of the Income Tax Ordinance, 2001, against which he had already filed an appeal before the Commissioner Inland Revenue (Appeals) in July 2024. Despite the appeal remaining pending, the tax department proceeded to issue recovery notices and later froze his bank accounts, including the account receiving his government pension.

The Revenue Division, through RTO-II Karachi, defended its action by arguing that the assessment order had become enforceable and, in the absence of a stay order from the appellate authority, recovery proceedings were legally permissible. The department also maintained that the FTO lacked jurisdiction because the assessment itself was already under appeal.

However, the Ombudsman rejected the jurisdictional objection, observing that the complaint was not against the tax assessment itself but against the manner in which recovery was carried out while the statutory appeal remained undecided.

The FTO held that coercive recovery during the pendency of a first appeal was contrary to law and inconsistent with judicial precedents. It further ruled that attaching or freezing a dedicated pension account for tax recovery was unlawful, noting that pension funds are protected under the Pensions Act, 1871, Section 60(1)(g) of the Code of Civil Procedure, and relevant civil service regulations.

The Ombudsman also condemned the prolonged delay in deciding the taxpayer’s appeal, noting that it had remained pending for nearly two years despite the Income Tax Ordinance requiring appeals to be decided within 120 days. The delay, combined with the recovery action, amounted to maladministration under the Federal Tax Ombudsman Ordinance, 2000.

In its recommendations, the FTO directed the FBR to instruct the Commissioner Inland Revenue, Zone-I, RTO-II Karachi, to de-attach all bank accounts, including the complainant’s pension account, within seven days. It further ordered the Commissioner Inland Revenue (Appeals-II), Karachi, to decide the pending appeal within 40 days and submit a compliance report to the Ombudsman within 45 days.

Copyright Business Recorder, 2026

On the issue of tax estimates for 2026-27, the FBR’s report said that periodic updating of coefficients and incorporation of scenario analysis can further strengthen the 12 predictive performance of the model and safeguard against structural breaks or unexpected economic disruptions.

The calculated autonomous growth rates were then applied to the projected base year collections for FY2025–26 to estimate incremental revenue for FY2026–27. The additional revenue derived from this process was added to the base year collections to arrive at the final projections. These figures therefore represent baseline revenue expectations, excluding the impact of any new taxation measures, rate adjustments, or policy reforms that may be introduced during the FY2026–27 budget process, FBR added.

Copyright Business Recorder, 2026

The Federal Board of Revenue (FBR) has issued updated Sales Tax Act, 1990 and Federal Excise Act, 2005, incorporating amendments made through Finance Act 2026.

Sales tax experts and practitioners told Business Recorder that the updated laws have specified the sections replaced with the new section, but the old provisions have not been reproduced in the foot note. Certain provisions of sub-sections have not been mentioned in the foot notes which need to be corrected.

Similarly, certain spelling mistakes have also been observed in the main contents of the Sales Tax Act, 1990. Furthermore, while preparing the footnotes, the clauses of the Finance Act, 2026 have been pasted instead of providing brief explanatory footnotes.

The FBR appeared to be deviated from its previous practice, and it appears that someone prepared the law in haste. It seems that revised law has not been thoroughly review before uploading the same on the FBR’s official website.

A well-respected tax lawyer stated that this unprecedented action by the Board may misguide taxpayers and requested that the Chairman, FBR, personally look into the matter and make the necessary corrections.

It appears that the updated laws have been issued in hurry which needs further review before uploading on the FBR website.

The Sales Tax Act, 1990 and Federal Excise Act, 2005as amended up to June 30, 2026 has been placed on the FBR website on Friday. The amendments made through Finance Act, 2026 have been shown in Red.

Copyright Business Recorder, 2026

In a communication addressed to the Chairman of the Appellate Tribunal Inland Revenue (ATIR) and marked in advance copy to the Prime Minister’s Performance Delivery Unit, the Federal Minister for Law and Justice, and the Secretary, Law and Justice Division, the Committee has requested an urgent and independent investigation into the conduct of proceedings before Appellate Tribunal, Islamabad.

The representation, moved by Chairman of the LTBA-PILC, is founded on a written complaint received from Muhammad Zulqarnain Awan, Advocate dated 13 July 2026. An order rejecting the condonation application, though dated 19.05.2026 on its face, is alleged to have actually been issued on 24.06.2026, over a month later, without any explanation for the delay.

Despite the condonation application having purportedly been rejected on 19.05.2026, the main appeal was nonetheless fixed and heard on 03.06.2026, a sequence the complainant describes as irreconcilable with an innocent reading of the record, the applicant alleged.

The ATIR order sheet dated 19.05.2026, as available with the applicant, is stated to be missing the signature of one of the Members of the Bench, notwithstanding representations that the file was still lying in the issuance branch as late as 23.06.2026.

The LTBA-PILC has been careful to note that these remain, at this stage, allegations and that no finding of guilt against any individual Member of the Bench is intended or implied. The Committee has explicitly stated that such a determination is properly reserved for a competent and independent inquiry. Nevertheless, it has termed the allegations “grave,” warning that if true even in part, they would strike at the integrity of the judicial record of an appellate forum entrusted with tax adjudication in Pakistan.

LTBA-PILC has requested the Chairman, ATIR, to cause a detailed and independent investigation, on a priority basis, into the circumstances surrounding the alleged backdating, delayed issuance, and unsigned status of the order sheet dated 19.05.2026, along with the related contradictions in the record. It has further requested that the outcome of the investigation be shared with the Committee for its information and record.

Copyright Business Recorder, 2026

The Sales Tax Act, 1990 and Federal Excise Act, 2005as amended up to June 30, 2026 has been placed on the FBR website on Friday. The amendments made through Finance Act, 2026 have been shown in Red.

Copyright Business Recorder, 2026

Speaking in a seminar held at the Securities and Exchange Commission (SECP), Habib said the government’s economic direction was encouraging and macroeconomic indicators had improved, but structural challenges, particularly expensive electricity and taxation, remained major obstacles to sustainable economic growth.

“Presently, Pakistan is facing several problems in attracting new investment into the economy, both from international and local investors. That is mainly because the cost of production is high,” he said, adding that electricity prices in the country are significantly higher than those in competing regional economies.

PIACL control handed to Arif Habib-led consortium

During his speech, Habib noted that high energy prices have eroded the competitiveness of Pakistani manufacturers, making it difficult for exporters to compete in international markets.

“That’s why I think our exports are not growing.”

Habib also highlighted the tax burden on businesses, saying that 29% corporate income tax, 10% super tax and other levies combine “which goes up to 50-60%” is substantially higher than in many competing regional economies.

“If energy costs and taxes are reduced, I believe we will see some positive developments in the Pakistan economy in terms of investment,” he said.

He acknowledged that the government’s fiscal position had strengthened in recent years, helped by lower interest rates and a lower budget deficit.

Pakistan govt may approach IMF to reduce rate of taxes on businesses, Arif Habib says

Habib said Pakistan already possesses significant industrial capacity, which remains idle amid weak demand. He added that stronger economic activity would enable existing industries to increase output, without the need for further investment.

“I believe we will see further improvements in Pakistan’s overall economic environment going forward.”

Chairing a review meeting on FBR reforms, the prime minister directed the federal tax collecting body to cooperate with the business community and resolve its issues on a priority basis.

“Senior officers of FBR should visit Karachi in the first week of every month so that there is direct contact with the business community and their issues are resolved without delay,” he said, adding that companies complying with tax laws should be encouraged at the official level and their services acknowledged.

Terming the business community as the “backbone of the country’s economy”, PM Shehbaz directed the authorities to provide all possible facilities to promote higher production and exports.

“The government aims to create ease of doing business, promote investment and exports, and make the tax system more transparent and simple so that the confidence of the business community increases,” he said.

The prime minister said Pakistan’s economy was on the path to stability, adding that the current year would be marked by economic growth and increased business activity.

The meeting was briefed on the FBR’s performance and the implementation of ongoing reforms. Participants were informed that production monitoring systems had been installed in the tiles and fertiliser industries, while installation was underway in the textile and beverage sectors.

Officials said production monitoring had enabled the FBR to collect an additional Rs42 billion in taxes from the sugar industry and Rs38 billion from the cement industry over the past year. The beverages industry also contributed an additional Rs15 billion in tax revenue through the monitoring system.

The meeting was attended by Federal Minister for Law and Justice Azam Nazir Tarar, Federal Minister for Economic Affairs Ahad Khan Cheema, Federal Minister for Finance and Revenue Muhammad Aurangzeb, Federal Minister for Information and Broadcasting Attaullah Tarar, Federal Minister for Information Technology and Telecom Shiza Fatima, Minister of State for Finance and Railways Bilal Azhar Kayani, Special Assistant to the Prime Minister Haroon Akhtar, Governor State Bank of Pakistan Jamil Ahmed and relevant senior government officials.

Setting aside orders that refused such adjustment, the tribunal clarified that the Commissioner must first examine and apply any verified refundable amount before initiating coercive recovery under Sections 138 and 140, and cannot reject adjustment merely on the ground that super tax is a separate charge.

READ ALSO: Super tax on up to Rs500m income abolished

Recovery of the remaining Rs58.27 million super tax demands for the taxpayer was stayed, with directions to the Commissioner to verify the claimed Rs230.955 million refunds for Tax Year 2025 and adjust it against the demand, recovering only the balance, if any, thereafter through a speaking order.

The tribunal held, in substance, that section 4C super tax is an independent charge for purposes of levy and computation, but it is still a “tax due under the Ordinance” and, therefore, an available refund/excess tax can be adjusted against it under section 170(3)(a).

The key findings of the order revealed that the case was not about claiming withholding tax credit inside the computation of section 4C liability. The taxpayer had already accepted the super tax liability and paid Rs12.648 million. The dispute was only whether the remaining Rs58.27 million could be adjusted against the refundable income tax of Rs230.955 million shown in the return. The tribunal treated this as a matter of appropriation of refund against demand, not computation of super tax.

The tribunal distinguished CM Pak. It held that CM Pak dealt with the adjustment of withholding taxes/tax credits against the computation of section 4C liability. It did not decide that an available refund under section 170 can never be adjusted against a section 4C demand. Therefore, the Commissioner Appeals misapplied CM Pak by treating “withholding tax adjustment” and “refund adjustment” as the same thing.

The tribunal held that section 170(3)(a) is wide. Once the Commissioner is satisfied that tax has been overpaid, he “shall” apply the excess in reduction of “any other tax due” from the taxpayer under the Ordinance. Since section 4C super tax is imposed, determined, payable and recoverable under the Ordinance, it falls within this expression.

The tribunal also held that recovery under sections 138 and 140 cannot be started or continued by ignoring an available refund. If the department already holds money refundable or adjustable to the taxpayer, it must first examine and apply that amount, if legally available, before attaching bank accounts or taking coercive recovery action. Rule 210B was relied upon because it requires satisfaction that no refund is available for adjustment before section 140 recovery is approved.

On the department’s possible objection that a refund is application-dependent under section 170(1), the tribunal held that this is an incomplete reading of section 170. Section 170(1) and 170(4) regulate the taxpayer’s formal claim for refund/payment. However, section 170(3)(a) independently prescribes the statutory order of adjustment once excess tax is found: first against other tax due, then against other outstanding liabilities, and only thereafter refund of the balance. Therefore, the department cannot ignore an apparent excess merely because a separate refund application has not culminated in a refund order.

The tribunal clarified the limit of its finding: an unverified or disputed refund does not automatically wipe out a section 4C demand. The Commissioner may verify whether the refund is actually due, reduced by other liabilities, or otherwise unavailable. But he must examine it and pass a speaking order; he cannot reject adjustment merely because section 4C is an independent charge.

The relief granted was that the orders were set aside to the extent they refused consideration of the refund adjustment. Recovery of the section 4C demand was stayed until the Commissioner examines the taxpayer’s refund claim of Rs230.95 million for tax year 2025 under section 170. If a refund is found due and available, it must be adjusted against the super tax demand, and only the balance, if any, may be recovered. If no refund is found due or available, reasons must be recorded in a speaking order, and then recovery may proceed according to law.

Copyright Business Recorder, 2026

Under the new mechanism, sales tax collected through e-payments and card transactions will now be transferred directly to the government, a move authorities say will significantly enhance transparency and efficiency in tax collection. A spokesperson for the Punjab Revenue Authority said sales tax on services offered by beauty parlours, salons and fashion designers has been fixed at 5 percent. Cosmetic surgery, plastic surgery, skin treatment and laser treatment centres will likewise fall under the 5 percent bracket, while event management services, tour operators, gymnasiums and laundry services will be taxed at 8 percent. In the hotel and restaurant sector, the new structure offers a clear incentive for digital payments. Customers paying in cash will be charged 16 percent sales tax, while those paying through digital means, including credit and debit cards, will pay just 8 percent, effectively halving the tax rate for cashless transactions.

The spokesperson said tax revenue collected from the public plays a critical role in funding the Government’s welfare and development initiatives, and urged citizens to opt for digital payments wherever possible and to always obtain a proper tax invoice to ensure funds are transparently and securely channelled to the government.

The public was also asked to report any food outlets or service providers found failing to issue valid tax invoices to the Punjab Revenue Authority.

Copyright Business Recorder, 2026

The FTO directed the Federal Board of Revenue (FBR) to finalise her lawful tax registration within 30 days and remove the procedural and system-related obstacles preventing her from filing income tax returns and complying with tax laws.

READ ALSO: ITO does not independently authorise coercive recovery or collection of tax: FTO

The case involved a woman whose CNIC had been misused, without her knowledge or consent, to obtain a fraudulent NTN. Although FBR subsequently cancelled the fraudulent registration and acknowledged that she was a victim of identity misuse, she remained trapped in the tax registration system and was unable to obtain a valid NTN in her own name.

The FTO observed that administrative justice is not achieved merely by disposing of a complaint on technical grounds. Where continuing maladministration deprives a citizen of a lawful right, the grievance must be fully and effectively resolved.

While maintaining that the challenge relating to the cancellation of the fraudulent NTN was barred by limitation, the FTO held that the woman’s continuing inability to secure lawful tax registration constituted an ongoing instance of maladministration requiring immediate intervention.

The review petition was therefore partly allowed, and the earlier order was modified to provide meaningful and practical relief to the complainant.

The FTO directed FBR to complete her lawful registration within the prescribed period and eliminate avoidable system constraints that were preventing her from fulfilling her tax obligations. In case any legal impediment remains, FBR must communicate it to the complainant through a reasoned speaking order.

FBR has also been directed to submit a compliance report to the Federal Tax Ombudsman within the prescribed period.

Taking notice of the growing number of cases involving the fraudulent use of CNICs for obtaining tax registrations, the Federal Tax Ombudsman recommended that FBR formulate a comprehensive Standard Operating Procedure for the prompt restoration or issuance of lawful tax registrations after proper verification.

The proposed SOP is intended to ensure that innocent taxpayers, including women whose identities are misused, are not subjected to prolonged hardship because of fraudulent registrations or deficiencies in FBR’s systems and procedures.

The order also explains the scope of review jurisdiction exercised by the FTO Secretariat. It clarifies that review cannot be used as a substitute for an appeal, but may be exercised where an earlier order, despite being legally sustainable, leaves a genuine grievance or continuing maladministration unresolved.

The FTO observed that the effectiveness of the institution should not be measured merely by the number of complaints disposed of, but by whether maladministration is actually eliminated and citizens receive meaningful and practical relief.

The decision reflects the FTO’s commitment to protecting women taxpayers and other citizens from identity fraud, administrative injustice and unnecessary procedural barriers within the tax system.

Copyright Business Recorder, 2026

According to an order (ITA.773/IB/2026) of the ATIR division bench Islamabad issued on Tuesday, ATIR has ruled that the taxpayer was rightly liable to pay Super Tax under Section 4C of the Income Tax Ordinance, 2001.

READ ALSO: Default surcharge on super tax: PBC urges FBR to withdraw recovery notices

However, the levy of default surcharge under Section 205 for the period during which the appellant’s obligation to pay remained regulated by the interim and final orders of the superior courts is without lawful authority and cannot be sustained.

The Tribunal observed that constitutional guarantees prohibit the imposition of adverse fiscal consequences on a litigant who has acted in compliance with binding judicial orders. Consequently, it set aside the default surcharge for the protected period while allowing the appeal to that extent.

The impugned order levying default surcharge for the said protected period is, therefore, set aside to that extent. Subject to the above observations, the appeal stands allowed in the aforesaid terms, it added.

Copyright Business Recorder, 2026

The order notes that although the taxpayer’s grievance had remained unresolved for more than two months after the FTO’s earlier findings, the Chief Sales Tax informed the Forum during the hearing that he would personally examine the matter and sought a one-day adjournment to ensure complete relief. While granting the request, the FTO observed that continued non-implementation of its recommendations, despite approval at the level of the Chief Sales Tax, could warrant a recommendation to the Federal Board of Revenue to call for explanations from all officers in the chain responsible for the delay.

When the matter was taken up on the following day, the Chief Sales Tax informed the Forum that, pursuant to his personal intervention, the taxpayer’s Sales Tax profile had been unblocked. The complainant also confirmed in writing that his grievance had been fully redressed and that he no longer wished to pursue the matter.

In view of these developments, the FTO withdrew only the proposed recommendation relating to seeking an explanation from the Chief Sales Tax, while reaffirming all other findings and recommendations recorded in the earlier order. The order makes it clear that this modification was made solely in recognition of the prompt corrective action taken by the Chief Sales Tax and does not dilute the original findings regarding maladministration.

The order further reiterates that taxpayers should not be compelled to invoke repeated proceedings for obtaining lawful relief and that delays in implementing FTO recommendations undermine public confidence in tax administration. At the same time, it emphasizes that while maladministration will continue to be dealt with firmly, officers who accept responsibility and take effective corrective action deserve due recognition. As observed in the order, this balanced approach strengthens accountability while promoting a culture of responsive public administration.

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According to details shared by KPRA’s Media Wing on Thursday, the authority collected Rs48.71 billion under Sales Tax on Services against Rs40.60 billion collected during the last financial year, registering an increase of Rs8.11 billion.

KPRA also surpassed its assigned STS collection target of Rs45.5 billion. The impressive growth reflects the authority’s strong performance in the sector-wise collection of Sales Tax on Services through enhanced tax administration, effective enforcement, and improved taxpayer facilitation.

The Authority collected Rs5 billion under Infrastructure Development Cess (IDC) during the financial year. The reduction in IDC receipts was mainly due to the closure of the Pakistan-Afghanistan border crossings.

Director General KPRA, Miss Irum Naz, appreciated the dedication and hard work of KPRA officers and officials for delivering outstanding growth in the Authority’s core tax collection. “I am glad that KPRA Headquarters and all regional offices successfully achieved their respective Sales Tax on Services collection targets assigned for the financial year 2025-26. I am confident that, with the same strategy, dedication and commitment, they will achieve next year’s targets as well,” she said.

She expressed gratitude to the Chief Minister Khyber Pakhtunkhwa Muhammad Sohail Afridi, Advisor to the Chief Minister of Finance, Muzzammil Aslam and Secretary Finance Capt. Kamran Ahmad Afridi (retd), for their continued guidance and support, which played a vital role in strengthening KPRA’s institutional performance and revenue reforms. She also thanked the taxpayers for their continued trust and cooperation, saying that their commitment to voluntary compliance remains the foundation of the Authority’s success.

DG KPRA said, “The encouraging growth in Sales Tax on Services reflects taxpayers’ confidence in KPRA and the effectiveness of our ongoing reforms. We will continue to expand the tax base, strengthen compliance, enhance digital services, and facilitate taxpayers to ensure sustainable growth in provincial own-source revenues.”

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According to the spokesperson of the Punjab Revenue Authority, the authority collected Rs 270 billion in tax during fiscal year 2024-25, meaning the current year’s collection exceeded that figure by Rs 97 billion.

The authority also collected more than Rs 48 billion in June alone, closing the fiscal year on an exemplary note. Chairman of the Punjab Revenue Authority, Muazzam Iqbal Sipra, said that this is the highest tax collection since the establishment of the authority, adding that the institution demonstrated highly impressive performance despite challenges such as regional conflict and reduced business hours.

He said the set targets were achieved due to the unwavering commitment and full support of the Chief Minister of Punjab, along with the trust of taxpayers.

He further informed that the Punjab government has set a target of Rs 528 billion for the authority for the upcoming fiscal year 2026-27. The Chairman said that efforts are being made to further expand the tax net across the province, promote a culture of tax compliance, and accelerate the process of digital reforms in order to successfully achieve future targets as well.

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According to the official details, the collection under the Sindh Sales Tax (SST) rose to Rs344.602 billion, a 21.2 percent increase over the previous year’s Rs284.377 billion.

Similarly, revenue from the Sindh Workers’ Welfare Fund (SWWF) and Sindh Companies Profits Workers’ Participation Fund (SWPF) climbed to Rs24.435 billion from Rs22.253 billion, a growth of 10 percent.

The newly assigned Agricultural Income Tax (AIT), collected for the first time this fiscal year, crossed Rs1 billion.

The board also closed the year with its strongest single-month performance, collecting Rs45.08 billion in June 2026, which is the highest monthly collection in SRB’s history and a 28.3 percent jump over May 2026’s Rs35.15 billion.

SRB officials said the growth came despite headwinds including sluggish economic activity and the fallout of regional conflict on revenue collection in the second half of the fiscal year.

The board attributed its performance to the efforts of its staff, support from the Government of Sindh, and cooperation from taxpayers.

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The online survey, conducted after the announcement of the proposal in the Finance Bill 2026, received responses from 45 male and 55 female participants.

It found that respondents broadly backed the principle of taxing influencers, while emphasising the need for a balanced policy that does not discourage young entrepreneurs or emerging content creators.

The government proposed a 5% withholding tax on income earned by social media influencers and digital content creators. This measure is part of the Finance Bill 2026 and aims to bring revenue generated from social media platforms into a formal tax regime for revenue enhancement.

Federal Board of Revenue (FBR) officials noted that earnings from digital platforms are rapidly increasing and largely remain outside the tax net. The government estimates that income generated from social media activities in Pakistan ranges from Rs4 billion to Rs10 billion.

According to the PNP survey, respondents gave an average rating of 3.42 out of 5 in support of imposing the proposed 5% withholding tax on influencers’ income, indicating an overall positive stance toward the measure.

Support was even stronger for the broader principle of taxation, with respondents assigning an average score of 3.89 out of 5 to the statement that social media influencers should pay taxes like other businesses and professionals.

However, participants also expressed concern that the proposed tax could discourage young people from pursuing careers in digital content creation, which received an average score of 3.34 out of 5.

The survey highlighted strong public backing for exempting smaller creators from the proposed tax. Respondents awarded an average score of 3.88 out of 5 to the proposal that influencers earning below a certain income threshold should be exempted from the withholding tax.

Participants also supported complementary measures to encourage growth in Pakistan’s digital economy. The highest average score, 3.92 out of 5, was recorded for the recommendation that the government introduce incentives alongside taxation to support digital content creators.

On the potential impact across platforms, 53.8% of respondents believed YouTube creators would be the most affected by the proposed tax. Another 24.6% felt the tax would affect all social media platforms equally.

Meanwhile, 9.2% identified Instagram as the social media platform likely to be most impacted, followed by TikTok (6.2%), while Facebook and bloggers/websites each accounted for 3.1% of responses.

The PNP report stated that the survey demonstrates that Pakistanis generally support the idea that social media influencers should contribute to the national tax system, but the taxation should be fair and accompanied by supportive policies that encourage innovation and digital entrepreneurship.

 “As Pakistan’s digital economy continues to expand, balanced policymaking will be essential to ensure that taxation strengthens rather than hinders one of the country’s fastest-growing sectors,” it concluded.

CAP, representing tax-compliant Tier-1 retailers, has consistently supported formalisation and broadening of the tax base. However, Third Schedule treatment for price-variable, retailer-led categories will overtax consumers and place pressure on documented retailers and manufacturers.

Public reports estimate that the proposed expansion through the Finance Bill 2026 will generate between Rs 50 billion and Rs 91 billion, indicating the scale of cost that is likely to be reflected in higher prices for end customers, while informal operators selling undocumented or smuggled goods will gain a price advantage.

CAP warned that charging tax on the original retail price can turn 18 percent sales tax into a much higher effective tax burden for consumers.

Retail brands often apply end-of-season and other discounts on a significant share of products; for a product sold at a 30 percent discount from its original price, this can result in an effective GST rate of approximately 26 percent instead of 18 percent.

The association has urged the Government to limit Third Schedule treatment to branded, retail-packed and standardised goods only, where the manufacturer or importer fixes a stable retail price and goods are sold through third-party retail channels. It has also urged the Ministry of Finance, Tax Policy Office and FBR to retain actual POS transaction-value taxation for FBR POS-integrated Tier-1 retailers.

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Citing budget documents, he noted that the government has earmarked Rs8.054 trillion for mark-up payments in FY2026–27, including Rs6.96 trillion on domestic debt and Rs1.07 trillion on foreign debt. With the Federal Board of Revenue (FBR) targeting Rs15.26 trillion in tax collection, he stressed that debt servicing alone will consume the majority of taxpayers’ contributions.

“How long can the economy sustain such fragile fiscal conditions?” he asked, urging policymakers to rethink borrowing-led strategies and instead strengthen indigenous economic capacity. “It is only mark-up. Just imagine the quantum of debt,” he remarked.

He added that the government continues to finance its budget deficit through domestic borrowing from the banking system via Treasury Bills and Pakistan Investment Bonds. He noted that commercial banks prefer investing in government securities due to secure and high returns, rather than channeling funds into productive sectors that generate real economic growth.

Khurram Ijaz also warned that persistently high interest rates are compounding fiscal pressures on both the government and the general public. He called on the SBP to significantly reduce the policy rate to encourage investment in productive sectors.

“Keeping high interest rates only attracts people to park their money in banks and earn returns without contributing to the real economy,” he said.

He further observed that many industrialists are shifting capital away from manufacturing and into banking deposits due to high energy costs, labour expenses, and regulatory burdens that make industrial operations increasingly difficult.

He noted that while monetary policy had previously seen easing, bringing rates down to 10.5%, the trend has reversed, with the policy rate now rising to 11.5%.

Ijaz urged the government to shift focus away from debt-driven financing and instead prioritize export-led growth and industrial expansion, warning that continued reliance on borrowing will only deepen the tax burden on citizens.

The Federal Board of Revenue’s (FBR) top Member Dr Hamid Ateeq Sarwar Monday informed the National Assembly Standing Committee on Finance that the government would persuade 3.5 million small shopkeepers to look into this matter and lure them to come into the tax net. “We will initially target almost 100,000 retailers for contributing at least Rs 25,000 to avail this scheme,” he said, and added that there would be no audit until and unless a massive discrepancy was found for having luxury vehicles and plots in the Defence Housing Authority.

No tax official in the field formation can visit or raid the shop to which a specific “number plate” has been allocated by the FBR under the scheme.

He added that the government would target 100,000 small retailers at the first stage. On the super tax, he said that the higher income earners exceeding Rs 500 million would have an revenue impact of Rs 400 billion.

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According to the PRA, in Lahore division, outlets of five renowned food chains were sealed for manipulating tax records. Meanwhile, in Rawalpindi division, the offices of 10 property developers and builders were sealed over non-payment of taxes. The enforcement actions form part of PRA’s ongoing efforts to ensure tax compliance and protect public revenue.

Commenting on the operations, PRA Chairman Moazzam Iqbal Sipra stated that heavy penalties have also been imposed on businesses involved in fraudulent tax returns and failure to file returns on time. He warned that bank accounts of persistent violators would also be frozen to recover outstanding penalties and tax liabilities.

He further said that a special enforcement campaign is underway throughout Punjab to ensure immediate recovery of due taxes.

“Notices are being issued to businesses and individuals involved in tax evasion and fraudulent practices that cause losses to the national exchequer,” he added. The chairman reiterated the PRA’s commitment to taking strict action against all those who attempt to evade their legal tax obligations.

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Speaking to Business Recorder, Mir noted that the scheme, as currently designed, would effectively apply only to micro-scale traders, since the government has already excluded distributors, wholesalers, brands, importers, exporters, processors, jewelers, and other mid-tier business categories from its scope. This exclusion, he said, leaves the scheme’s weight falling almost entirely on those with the most limited business turnover.

While welcoming certain aspects of the proposal, Mir praised the introduction of a simplified tax return form and the government’s broader push to bring traders into a documented economy, stating that traders across the country have no objection to being registered with the Federal Board of Revenue. He described these measures as a positive step in the right direction.

However, he firmly opposed the imposition of an annual fixed tax of twenty-five thousand rupees on micro-scale traders, calling it an ill-conceived decision that the Finance Minister should revisit without delay.

Mir proposed an alternative approach in which the first phase focuses exclusively on registering traders and connecting all commercial units to the FBR system through a simplified return form. The data collected should then be processed through the FBR’s digital infrastructure to identify those concealing their true business size to avoid taxation. Verified tax evaders should be issued legal notices and brought into the formal tax net accordingly.

He warned that deploying FBR officials into markets and bazaars to monitor QR codes, affix plaques, and directly collect fixed taxes from small shopkeepers contradicts the government’s own stated commitment to a faceless and fully digital tax system, a vision repeatedly endorsed by Prime Minister Shehbaz Sharif.

Mir concluded by expressing confidence that the Finance Minister would act on traders’ concerns and revise the scheme to focus solely on registration and economic documentation, a move he said would make the scheme both more acceptable to the business community and more effective in achieving its objectives.

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