Sales Tax Act: Proposed Section 37AA irks businessmen at large

LAHORE: Proposed insertion of a new Section 37AA in the Sales Tax Act has irked businessmen at large, authorizing an Inland Revenue Officers (IROs) to arrest without warrant based on mere suspicion of tax fraud – a power that invites abuse and harassment.

They said the provision creates a surveillance state where businesses operate under the constant threat of arbitrary action. This is not tax policy but a systematic harassment institutionalized by law, they added.

As per the provision, an IRO can arrest a person involved in a tax fraud or any offence under the Act with prior approval from the commissioner. If delay may let the person escape or it is impractical to get approval, the officer may arrest without it – but he must immediately inform the commissioner with all relevant facts and grounds for arrest.

It may be noted that the Sales Tax Act had empowered the IRO to raid a business place and confiscate books of account, computers and business record in case of tax fraud. But the present one provision has proposed arrest of taxpayer to investigate and get a confession on the assumption that a tax fraud may have happened.

They said empowering IROs with such an authority would lead to corrupt practices besides harassment. Mustafa Ashraf, a tax consultant, also pointed out that how a commission can extend approval for arrest a taxpayer when he’s not present on the spot simply on the statement of IRO regarding a tax fraud. No procedure has been defined and the commissioner would be authorizing IRO on his verbal briefing on tax fraud, he wondered. Also, he added that how an IRO can arrest a taxpayer first and seek an approval from the commissioner in the follow up.

Some other tax experts dubbed the said provision as a complete ambiguity. They said the said provision also lacks the procedure regarding pre or post arrest bail of taxpayers. No such opportunity has been given to taxpayers and IRO has been bestowed with unlimited powers.

It is nothing but harassment and sole discretion of IROs. Also, the provision does not suggest action against IROs in case their mala fide is established at the end of the whole exercise, they asserted.

Copyright Business Recorder, 2025