Updated Sales Tax Act identifies 11 activities, including fake invoices, false input claims and suppression of taxable supplies, as tax fraud.
ISLAMABAD: The Federal Board of Revenue (FBR) has specified the actions that constitute tax fraud under Pakistan’s sales tax laws for Tax Year 2027, covering fraudulent documentation, false input tax claims, concealed supplies and other violations that can cause a loss of revenue to the government.
The FBR issued the Sales Tax Act, 1990, updated up to June 30, 2026, which sets out the legal definition of tax fraud and identifies a range of activities that fall within its scope.
Under the updated law, tax fraud means knowingly, intentionally or dishonestly committing an act, or assisting another person in an act, that causes a loss of tax under the Sales Tax Act.
The following activities have been defined as tax fraud:
1. Using fake tax documents
Using or preparing false, forged or fictitious documents, including sales tax returns, statements, annexures and invoices, constitutes tax fraud.
2. Making false input tax claims
Falsely claiming input tax credit on the basis of fictitious transactions is classified as tax fraud under the law.
3. Issuing invoices without supplying goods
Issuing a tax invoice without an actual supply of goods is also included in the definition of tax fraud.
4. Destroying or tampering with evidence
Tampering with or destroying material evidence or documents required to be maintained under the Sales Tax Act or relevant rules falls within the definition of tax fraud.
5. Manipulating the FBR return system
Generating fake input through manipulation of the FBR’s return filing system, or making fraudulent entries in sales tax returns or their annexures, is also defined as tax fraud.
6. Fictitious compliance with payment requirements
The law covers fictitious compliance with Section 73, including routing payments back to a registered person, or for the registered person’s benefit, through a bank account maintained by a supplier or purported supplier.
7. Suppressing taxable supplies
Deliberately suppressing supplies that are chargeable to sales tax under the law is classified as tax fraud.
8. Making taxable supplies without invoices
Making taxable supplies of goods without issuing the required tax invoice is also included in the definition.
9. Suppressing withholding tax
Suppression and non-payment of withholding tax in the prescribed manner for more than three months after the due date constitutes tax fraud.
10. Dealing in goods liable to confiscation
The definition also covers the acquisition, possession, transportation, disposal, removal, deposit, storage, concealment, supply or purchase of goods where there are reasons to believe that the goods are liable to confiscation under the Sales Tax Act or rules made under it.
11. Making taxable supplies without registration
Making taxable supplies without obtaining the registration required under the Sales Tax Act is also classified as tax fraud.
The definition forms part of the FBR’s updated Sales Tax Act, 1990, providing the legal framework for identifying fraudulent activities that may result in a loss of sales tax revenue.
The provisions cover fraudulent documentation, manipulation of tax records, concealment of taxable transactions, misuse of input tax credits and dealings in potentially confiscable goods, among other activities.
The updated provisions therefore provide taxpayers and businesses with a clearer framework on the types of conduct that may be treated as tax fraud under Pakistan’s sales tax regime for Tax Year 2027.