Islamabad, July 10, 2025 — The Federal Board of Revenue (FBR) has come under scrutiny for introducing a controversial measure that disallows 50% of business expenditure linked to high-value cash sales.
Despite backlash from lawmakers and the business community, the FBR remains firm in defending the policy, citing the country’s shift toward a more transparent, cashless economy.
Chairman FBR Rashid Mahmood Langrial clarified the stance during a session with the Senate Standing Committee on Finance. He explained that the provision was introduced through the Finance Act 2025 and has been in effect since July 1, 2025. “This law was approved by the National Assembly Standing Committee on Finance and, to our understanding, also cleared by the Senate Finance Committee,” Langrial said. “The legislators passed it—not the FBR.”
The new rule, under Section 24 of the Income Tax Ordinance, 2001, applies exclusively to the “Income from Business” category as outlined in Section 18. It disallows 50% of any expenditure if the corresponding sales are conducted in cash and exceed Rs200,000 in a single transaction. The goal, according to the FBR, is to discourage undocumented cash sales and bring more transparency to business transactions.
However, the move was not received well by several senators. Senator Mohsin Aziz questioned the rationale, labeling it an “anti-business” provision. “Ask any businessman, and they’ll tell you this kind of restriction on cash sales will disrupt operations, especially in sectors where digital payments are not yet fully integrated,” he argued.
Senator Sherry Rehman also expressed strong opposition on behalf of the Pakistan Peoples Party (PPP), calling the measure “draconian” and “harmful to small traders.” She emphasized that the policy could hurt economic activity in regions where banking infrastructure is weak and digital adoption is still limited.
In defense, Langrial reiterated that limiting cash transactions in large sales is part of FBR’s broader strategy to improve tax compliance and reduce the size of the undocumented economy. “If someone is making large sales, they should be able to do it through traceable channels. That’s the direction we’re headed,” he said.
The debate continues as stakeholders push for a review in the next Finance Bill (2026–27), while the FBR remains committed to its fiscal reforms.