Arrests for tax fraud: major changes made in sales tax law thru Finance Bill

ISLAMABAD: The Federal Board of Revenue (FBR) has introduced major changes in sales tax law through Finance Bill 2025 for the arrest of those involved in tax evasion or tax fraud.

According to a statement issued by the FBR on Friday, Finance bill is currently being discussed in the National Assembly and among various business circles.

An impression has been created that some of the amendments introduced in the Finance Bill are not understood well by the public at large.

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For instance, the legal provisions for the arrest of those involved in a tax fraud have already been provided under Section 37A of the Sales Tax Act, 1990 along with an elaborate procedure to be followed after the arrest which involves intimating the Special Judge immediately and the production of such person before Special Judge within 24 hours.

However, the proposed amendment now restricts the powers of the officer to arrest by making prior inquiry after approval of the Commissioner Inland Revenue (CIR).

Only on the basis of the findings of the inquiry CIR will authorise the investigation which would give the investigation officer the powers of an officer in charge of a police station under Code of Criminal Procedure, 1898 (Act V of 1898). The arrest can only be made with the prior approval of CIR if the investigation officer has reasons to believe that a tax fraud may have been committed by a person.

The FBR further stated that the new legal provision further provides that if the arrest is malafide, the matter will be referred to the Chief Commissioner for fact finding inquiry. This shows that in contrast to the earlier provision where an Assistant CIR could arrest an offender, the new provisions bring transparency in the process by a mandatory prior inquiry and investigation and finally permission by the CIR.

Moreover, certain changes and amendments are also necessary to reassure the compliant taxpayers that those evading taxes or involved in tax fraud are dealt with by the state with an iron hand.

FBR Chairman Rashid Mahmood Langrial has expressed his willingness to discuss the recent changes made in the tax laws and introduce changes wherever needed, for example, the provisions related to arrest could be revised to mandate the permission of multiple senior officers before any arrest.

Furthermore, in order to ensure that these powers are not misused by the authorised tax officers against the compliant taxpayers and business community, Prime Minister Shehbaz Sharif has formed a high-powered committee, which will be headed by Minister for Finance and Revenue, to re-evaluate the proposed amendments and suggest adequate safeguards to prevent potential misuse of powers.

The other members of the Committee will include Ministers of Law and Economic Affairs Division, Minister of State for Finance, SAPM Industries and Chairman FBR.

The Committee will also examine various options to ensure that legal economic activities are not stifled and propose additional protective measures against unlawful use of authority. The Committee will submit its recommendations to Prime Minister in three days.

FBR is committed to safeguard the legal rights of the compliant taxpayers and to increase the tax collection and state revenues by discouraging non-compliant taxpayers and acknowledging those who are paying their due share to the state, FBR added.

Copyright Business Recorder, 2025