Karachi, August 7, 2024 – The Federal Board of Revenue (FBR) has announced the imposition of stringent penalties related to sales tax violations. The new measures were detailed in Sales Tax Circular No. 3, which elaborates on amendments to the sales tax laws introduced through the Finance Act, 2027.
A significant update involves the separation of criminal proceedings from civil liability in cases of sales tax evasion. This amendment, incorporated into sections 33 and 37A of the Sales Tax Act, 1990, now allows for criminal prosecution to proceed independently of civil liability assessments. This change means that tax authorities can initiate criminal proceedings at any stage, regardless of whether civil liability proceedings have been started or concluded.
The FBR has also introduced harsher punishments for tax fraud. According to the amendments, any individual who commits, attempts, or abets tax fraud will face severe consequences. Specifically, under Serial Nos. 11 and 13 of section 33, individuals found guilty of tax fraud could face imprisonment for up to five years if the tax evaded is up to five hundred million rupees. For tax evasion amounts exceeding one billion rupees, the prison term could extend to ten years. Additionally, the offenders could be fined up to the amount of tax evaded.
The same stringent punishments apply to individuals who engage in related fraudulent activities. These include submitting false or forged documents to tax officers, destroying or falsifying records, making false statements or declarations, and issuing or using forged or false documents. The FBR emphasized that these measures are crucial for maintaining the integrity of the tax system and deterring fraudulent practices.
“The amendments aim to create a robust mechanism to tackle tax evasion and fraud. Separating criminal proceedings from civil liability ensures that wrongdoers face consequences irrespective of ongoing civil cases,” stated an FBR spokesperson.
This move by the FBR underscores the government’s commitment to strengthening tax enforcement and ensuring compliance. The introduction of such severe penalties is expected to act as a significant deterrent against tax evasion and fraud, ultimately contributing to a more transparent and accountable tax system.
Taxpayers are urged to comply with the sales tax regulations and maintain accurate records to avoid the severe repercussions outlined in the new amendments. The FBR is also set to launch awareness campaigns to educate taxpayers about these changes and their implications.
The Finance Act, 2027, has thus introduced a transformative shift in the tax landscape of Pakistan, with the FBR taking decisive steps to curb tax evasion and enhance compliance.
