The Federal Board of Revenue (FBR) has been empowered under Rule 12 of the Sales Tax Rules, 2006 to suspend or blacklist sales tax registrations to curb tax fraud, fake invoicing, and non-compliance. The rule ensures that Large Taxpayer Offices (LTOs) and Regional Tax Offices (RTOs) follow a uniform and transparent procedure under Section 21(2) of the Sales Tax Act, 1990.
This article explains grounds, procedure, timelines, consequences, and taxpayers’ rights in an easy and structured manner.
⚠ Difference Between Suspension and Blacklisting
| Action | Nature | Duration | Legal Impact |
| Suspension | Temporary | Pending inquiry | Business restricted |
| Blacklisting | Permanent / penal | As ordered | Severe legal & tax consequences |
🔴 Grounds for Suspension of Registration (Rule 12(a))
A Commissioner may suspend registration without prior notice if satisfied that the registered person has:
📌 Key Grounds Include:
• ❌ Issued fake invoices
• ❌ Evaded tax or committed tax fraud (Section 2(37))
• ❌ Does not exist at the declared business address
• ❌ Refused access to premises or records under Sections 25, 37, 40B, 40C
• ❌ Declared business activity five times more than capital and liabilities
• ❌ Conducted over 10% purchases or supplies with other suspended persons
• ❌ Failed to file sales tax returns:
o 3 consecutive months, or
o 6 months of null returns
• ❌ Any other reason specified by the FBR Board
🧾 How Suspension Is Carried Out
• Suspension is ordered through the computerized system
• A written order with reasons must be issued
• Copies are shared with:
o All LTOs / RTOs
o FBR & PRAL systems
o STARR system
o Customs Wing
⚠ Automatic Suspension:
Non-filing of sales tax returns for three consecutive months results in system-based suspension without notice.
🚫 Consequences During Suspension
While registration is suspended:
• ❌ No input tax adjustment or refund allowed
• ❌ Other taxpayers cannot claim input tax on invoices issued by the suspended person
• ❌ Restriction applies to past and current invoices
📢 Show Cause Notice & Right of Hearing
• Commissioner must issue a show-cause notice within 7 days of suspension
• Taxpayer is given 15 days to respond
• Grounds for blacklisting include:
o No response to notice
o Failure to provide records
o Denial of access to premises
o Other Board-specified reasons
🚨 Important:
If no show-cause notice is issued within 7 days, the suspension becomes void ab-initio.
✅ Revocation of Suspension
• If the taxpayer submits a satisfactory reply
• Commissioner may revoke suspension within 30 days
• Opportunity of personal hearing is mandatory
⛔ Blacklisting of Sales Tax Registration (Rule 12(b))
If, after hearing, the offence is confirmed:
📌 Commissioner Shall:
• Issue a self-speaking, appealable order
• Initiate legal and penal proceedings
🧾 Blacklisting Order Must Specify:
• Reasons for blacklisting
• Period during which:
o Input tax and refunds are inadmissible
• Amount of recovery
• Penalties imposed
Timeline for Blacklisting
• Order must be issued within 90 days of hearing notice
• Failure to issue order within this period makes suspension void ab-initio
📤 System-Wide Implementation
Once blacklisted:
• Orders circulated to:
o All LTOs / RTOs
o FBR / PRAL systems
o STARR system
o Customs Wing
• Computer-generated lists of invoices issued by blacklisted persons are circulated to:
o Audit sections
o Refund sections
o Concerned Inland Revenue Officers
📑 Impact on Buyers Claiming Input Tax
• Buyers who claimed input tax on invoices of blacklisted persons will receive:
o Show-cause notice under Section 11 & Section 21(3)
• Input tax or refund may be rejected
• Decision issued through a self-speaking, appealable order
• Right of hearing is mandatory
📌 Key Takeaways for Tax Year 2026
• Suspension can be instant and without notice
• Input tax chain is completely blocked
• Strict 7-day and 90-day timelines protect taxpayers
• Blacklisting has far-reaching legal consequences
• Buyers must verify supplier status regularly
Disclaimer: This article is intended for general informational and educational purposes only and is based on Rule 12 of the Sales Tax Rules, 2006 (updated for tax year 2026). It does not constitute legal, tax, or professional advice. Readers are advised to consult a qualified tax advisor or the Federal Board of Revenue (FBR) before taking any action. The publisher shall not be liable for any loss or consequence arising from reliance on this information.