Fake or simulated tax invoices may attract penalties equal to invoice value, public listing, and automatic reversal of input tax credits under amended Sales Tax Act.
The Federal Board of Revenue (FBR) has explained the penalties and enforcement measures applicable to registered taxpayers involved in issuing fake or simulated tax invoices during fiscal year 2026-27.
The explanation has been provided under the amended Sales Tax Act, 1990, updated through June 30, 2026, as part of the government’s efforts to strengthen tax compliance and curb fraudulent practices.
According to the amended provisions, strict action will be taken against any registered person who issues a tax invoice for a transaction that is found to be simulated, fictitious, or unsupported by an actual supply of goods or services. Such violations will be determined through a formal process involving notice and adjudication by the relevant tax authorities.
The FBR stated that taxpayers found guilty of issuing fake invoices will face a financial penalty equal to the total face value of the simulated or fictitious invoice or invoices.
This measure is intended to discourage the use of fraudulent documentation and ensure greater transparency in commercial transactions.
In addition to the monetary penalty, the tax authority will place the name and sales tax registration number of the offending taxpayer on a publicly accessible register of simulated invoice issuers.
The listing will be made after the issuance of a show-cause notice and after providing the taxpayer with an opportunity to present a defense. The register will be maintained on the FBR’s computerized system and will be available for public access.
The consequences of being listed on the register extend beyond the offending taxpayer. Any input tax credit claimed by another taxpayer on the basis of invoices issued by a person included in the simulated invoice issuers register will be automatically reversed. Such input tax credits will be treated as inadmissible from the date the issuer’s name is placed on the register.
The FBR further explained that removal from the register will only be possible after full payment of the imposed penalty and any applicable default surcharge.
Additionally, the taxpayer must satisfactorily demonstrate compliance with tax laws and regulations before being removed from the list.
The latest clarification highlights the FBR’s commitment to combating tax fraud and ensuring the integrity of Pakistan’s sales tax system during FY2027.