Pakistan’s Federal Board of Revenue (FBR) had introduced tougher sales tax enforcement measures targeting digital non-compliance, fake and flying invoices, and unmatched input tax claims. The provisions had also established a public register for businesses issuing simulated invoices.
Pakistan’s Federal Board of Revenue (FBR) had introduced new sales tax provisions to strengthen enforcement against non-compliant taxpayers and address fraudulent invoicing.
Under the new measures, businesses that failed to integrate with the FBR’s digital monitoring systems would face a penalty of PKR 1 million. If the non-compliance continued after one month, a further penalty of up to PKR 5 million could be imposed.
The FBR could also seal business premises, with or without imposing a penalty, depending on the circumstances of the violation.
Penalties for fake and flying invoices
The provisions introduced a specific measure against fake and flying invoices. Where a business was found to have issued an invoice for a transaction that had not taken place, it would face a penalty equal to the full value of the fake invoice, including sales tax.
The business would also be included in the Simulated Invoice Issuers register, a new public register covering businesses involved in issuing such invoices.
Businesses claiming input tax on invoices issued by an entity listed on the register would automatically lose the relevant tax credit from the date of the entity’s listing.
Removal from the Simulated Invoice Issuers register would only be possible after the business had paid all applicable penalties and surcharges and demonstrated compliance with the relevant requirements.
Unmatched input tax claims
The new provisions had also addressed cases where input tax claimed by a business could not be matched with the supplier’s declared output tax.
In such cases, the claiming business would be required to pay a penalty equal to 20% of the unmatched amount. It would also have to reverse the relevant credit and pay a default surcharge.
The measures were intended to strengthen digital compliance, curb fraudulent invoicing and promote accurate reporting across the supply chain.
