Finance Act 2026 strengthens KPRA’s recovery powers and makes bank-wide compliance with recovery notices mandatory
PESHAWAR: The Government of Khyber Pakhtunkhwa (KP) has strengthened its tax recovery framework by introducing tougher penalties for bank officials who obstruct the recovery of provincial sales tax under the Khyber Pakhtunkhwa Finance Act, 2026.
The new legislation amends Section 74 of the Khyber Pakhtunkhwa Sales Tax on Services Act, enhancing the recovery powers of the Khyber Pakhtunkhwa Revenue Authority (KPRA), particularly in relation to the attachment of taxpayers’ bank accounts.
Bank-wide compliance made mandatory
Under the amended provisions, any recovery notice issued by the KPRA to a bank operating in Khyber Pakhtunkhwa will be binding on the entire banking institution.
Banks will no longer be permitted to refuse or delay compliance on the grounds that the relevant taxpayer’s account is maintained at a branch located outside the province.
The amendment is intended to eliminate administrative hurdles that previously slowed tax recovery when taxpayers maintained accounts in branches beyond Khyber Pakhtunkhwa.
Stricter penalties for non-compliance
The Finance Act, 2026 also introduces tougher sanctions for bank officials who fail to comply with valid recovery notices or deliberately obstruct the recovery process.
Under the revised law, any bank official who refuses to comply with a lawful recovery notice or is found to have manipulated its execution may face a personal penalty of up to Rs500,000 or five per cent of the amount of tax involved, whichever is higher.
The government expects the enhanced penalties to ensure timely compliance with recovery orders and discourage attempts to delay or frustrate the collection of provincial taxes.
KPRA’s enforcement powers strengthened
The amendment forms part of the Khyber Pakhtunkhwa government’s broader strategy to modernise tax administration, strengthen enforcement mechanisms and improve provincial revenue collection.
By making recovery notices enforceable across an entire banking institution rather than a single branch, the government aims to accelerate the recovery of outstanding tax liabilities and prevent tax defaulters from exploiting branch-specific technicalities to avoid enforcement.
Tax experts believe the revised provisions will enhance the KPRA’s ability to recover unpaid provincial sales tax while increasing accountability within the banking sector for complying with lawful tax recovery orders.
The latest measures are expected to support stronger tax administration in the province by improving enforcement efficiency, reducing procedural delays and reinforcing compliance with provincial tax laws.