Proposed amendments empower tax authorities to order re-audits and inventory revaluations in complex sales tax cases.
ISLAMABAD: The Finance Bill 2026 has proposed granting additional powers to the Federal Board of Revenue (FBR) to enhance scrutiny of sales tax matters by authorising re-audits of accounts and revaluation of inventories of registered persons under specific circumstances.
The proposed amendments seek to insert new sub-sections (8A) and (8B) into Section 25 of the Sales Tax Act, 1990, aimed at strengthening audit mechanisms and ensuring greater compliance with sales tax laws.
Under the proposed Section 25(8A), a Commissioner Inland Revenue may, after obtaining prior approval from the Chief Commissioner and providing the registered person with a reasonable opportunity of being heard, direct the taxpayer to undertake additional verification procedures where deemed necessary in the interest of revenue.
The Commissioner may invoke these powers after considering factors such as the nature and complexity of accounts, the volume of transactions, doubts regarding the correctness of accounts, multiplicity of transactions, or the specialised nature of the taxpayer’s business activities.
The proposed amendment authorises the Commissioner to require a registered person to:
• Obtain a re-audit of accounts by an accountant and submit a duly signed and verified audit report addressing specific queries raised by the tax authorities; or
• Conduct an inventory revaluation by a cost accountant and furnish a verified valuation report responding to questions raised by the Officer of Inland Revenue.
The Finance Bill further stipulates that the accountant or cost accountant for such assignments will be nominated by the Commissioner from a panel approved by the FBR.
Additionally, the proposed Section 25(8B) requires the Officer of Inland Revenue to issue a formal audit report after completion of the audit process. Before finalising the report, the taxpayer’s explanation on all audit observations must be obtained and considered. The audit report will contain the findings and observations arising from the audit exercise.
The proposed amendments are part of the government’s broader efforts under the Finance Bill 2026 to strengthen tax administration, improve documentation, and address potential revenue leakages within the sales tax regime.
If approved by Parliament, the new provisions will expand the FBR’s authority to conduct deeper scrutiny of taxpayers’ records, particularly in cases involving complex business structures and high-value transactions.
