Karachi, June 29, 2025 – In a significant legislative development, the Finance Act, 2025 has introduced sweeping changes to the powers of Inland Revenue (IR) officers by granting them the authority of a civil court during the course of inquiries under the Sales Tax Act, 1990.
This move is aimed at strengthening enforcement and improving the legal framework for tax investigations.
Through this year’s Finance Act, a new sub-section (4) has been added to Section 37 of the Sales Tax Act, 1990. The newly inserted provision empowers officers of Inland Revenue with legal capabilities akin to those of a civil court under the Code of Civil Procedure, 1908. This means that during any inquiry under the Act, IR officers will be legally equipped to summon individuals, enforce attendance, examine persons under oath, and demand the production of relevant documents.
The exact wording of the sub-section reads:
“For the purpose of an inquiry under this Act, the officer of Inland Revenue shall have the powers of a civil court trying a suit under the Code of Civil Procedure, 1908 (Act No. V of 1908), in respect of the following matters, namely:—
(a) summoning and enforcing the attendance of any person and examining him on oath; and
(b) requiring the discovery and production of documents and receiving evidence on affidavits.”
This provision, as introduced in the Finance Act, 2025, enhances the scope and strength of investigative authority available to IR officers, giving them more effective tools to tackle tax evasion, especially in complex sales tax fraud and compliance cases.
By vesting such judicial powers in tax officers, the government aims to accelerate the pace of inquiries and reduce dependency on conventional legal channels for obtaining testimony or documentation during tax probes. The move is also seen as a response to the increasing sophistication of tax fraud schemes and the need for faster, legally binding enforcement mechanisms.
Tax experts believe this change under the Finance Act could lead to more effective compliance and deterrence. However, it also places a greater responsibility on IR officers to exercise these new powers fairly, transparently, and within the bounds of law.