The Federal Board of Revenue (FBR) has clarified the rules governing joint and several liability in cases where sales tax remains unpaid within a supply chain.
These regulations have been incorporated into the Sales Tax Act, 1990, following amendments introduced through the Finance Act, 2025, to enhance compliance and accountability among registered businesses.
Understanding Section 8A
Section 8A of the Act explains that if a registered person receives taxable supplies from another registered person and has knowledge—or reasonable grounds to suspect—that some or all of the tax payable on that supply (or on any previous or subsequent supply of the same goods) may remain unpaid, both parties may be held jointly and severally liable.
This means that the purchasing party, as well as the supplier, can be compelled to pay the unpaid amount of sales tax to the government. However, the burden of proving that the recipient had knowledge or reasonable grounds for suspicion lies with the tax authorities.
Exemptions and Special Provisions
The law also empowers the FBR to issue official notifications in the Gazette, exempting certain transactions or categories of transactions from the provisions of Section 8A, provided specific conditions are met.
Compliance Importance
These measures ensure that every link in the supply chain shares responsibility for accurate tax payment, reducing the risk of revenue loss and strengthening the overall sales tax collection framework for 2025–26.
Disclaimer:
This article is for informational purposes only and does not constitute legal or financial advice. Businesses are advised to consult the Federal Board of Revenue (FBR) or a qualified tax professional for guidance on joint and several liability rules for sales tax in 2025–26.