FBR requires Inland Revenue officers to document audit observations and findings after considering taxpayers’ explanations.
ISLAMABAD: The Federal Board of Revenue (FBR) has introduced a requirement for Inland Revenue officers to issue a complete audit report containing their observations and findings after completing sales tax audit proceedings.
The FBR issued Circular No. 1 of 2026 to explain key amendments to the Sales Tax Act, 1990, introduced through the Finance Act, 2026.
According to the circular, the previous Section 25 of the Sales Tax Act, 1990, did not require an Inland Revenue officer to issue a formal audit report after completing audit proceedings.
However, a new sub-section (8B) of Section 25 has now been inserted, requiring the Inland Revenue officer to issue an audit report containing the audit observations and findings.
The report must be issued after obtaining the registered person’s explanation on all issues raised during the audit.
The amendment is intended to improve transparency in the sales tax audit process by formally documenting the findings of tax authorities while ensuring that taxpayers’ explanations are considered before the audit report is finalised.
Commissioner empowered to order re-audit
The FBR has also introduced a new sub-section (8A) of Section 25, empowering the Commissioner to direct a registered person to have their accounts re-audited by an accountant and their inventory revalued by a Cost Accountant.
According to the FBR, the Commissioner may exercise this power after considering several factors, including the nature and complexity of the accounts, volume of transactions, doubts regarding the correctness of accounts and multiplicity of transactions.
However, the Commissioner is required to provide the registered person with a reasonable opportunity of being heard before exercising these powers.
The amendments strengthen the FBR’s ability to scrutinise sales tax records while introducing additional procedural safeguards for registered persons.
The requirement to issue a complete audit report also provides taxpayers with a formal record of the tax authorities’ observations and findings following the completion of audit proceedings.
Overall, the changes seek to enhance the effectiveness and transparency of sales tax audits while ensuring that registered persons have an opportunity to respond to issues identified by Inland Revenue officers.