Islamabad, September 6, 2025 – The Federal Board of Revenue (FBR) has formally detailed the procedure for recovering unpaid or short-paid sales tax during the upcoming tax year 2025-26.
The announcement comes after amendments introduced through the Finance Act, 2025 were incorporated into the Sales Tax Act, 1990.
According to Section 11E of the updated law, Inland Revenue officers not below the rank of Assistant Commissioner will play a central role in identifying and addressing discrepancies. If an audit or review suggests that a person has failed to pay the due amount, short-paid their liability, claimed inadmissible input tax, or received a refund to which they were not entitled, the officer will issue a show-cause notice. Following due process, an order will be passed to recover the unpaid amount, along with penalties and default surcharges under Sections 33 and 34 of the Act.
The law also empowers officials to disallow input tax on goods or services if a taxpayer fails to produce proper invoices, receipts, or other valid documentation. This ensures that every sales tax claim is supported by evidence and prevents fraudulent practices.
Furthermore, Section 11E clarifies that in cases where tax has not been levied, the unpaid amount will be calculated as a tax fraction of the total value of supply. This provision ensures that the state can accurately recover its dues even when original assessments were missed or incorrectly filed.
By strengthening enforcement, the FBR aims to plug leakages in sales tax collection and create a fairer business environment. The emphasis on transparency and compliance highlights the government’s broader strategy to curb revenue losses and ensure that no unpaid liabilities go unnoticed in the 2025-26 fiscal year.
Disclaimer: This article is for informational purposes only and should not be considered as legal or tax advice.