Islamabad, October 4, 2025 – The Federal Government, through the Finance Act 2025, has introduced Section 37A into the Sales Tax Act, 1990, providing a comprehensive framework for inquiry, investigation, and arrest in cases of tax fraud.
This new section empowers Inland Revenue officers to act against individuals and companies suspected of serious violations.
According to the law, an Inland Revenue officer not below the rank of Assistant Commissioner may initiate an inquiry into suspected tax fraud, but only after obtaining approval from the Commissioner. During the inquiry, the officer has powers similar to those of a civil court, including summoning individuals, recording statements under oath, and demanding documentary evidence. The inquiry must be completed within six months.
Once the inquiry is concluded, the officer is required to submit a detailed report to the Commissioner, clearly indicating the amount involved in the alleged tax fraud. Based on this report, the Commissioner may approve further investigation, demand additional evidence, or close the case altogether. If the matter proceeds to investigation, it must be completed within three months and the findings presented before the competent court.
Section 37A also outlines conditions under which arrests can be made. A three-member committee authorized by the FBR Chairman may approve an arrest warrant if the alleged fraud involves more than Rs50 million, or if the accused is absconding, not cooperating with investigations, or attempting to tamper with evidence. Arrests can only be made in accordance with the Code of Criminal Procedure, ensuring due legal process.
The section further clarifies that directors and officers of companies may also be held personally liable for corporate tax fraud. However, the law provides an option for compounding the offence if the accused pays the evaded tax, surcharge, and penalty.
This development reflects the government’s intention to create stronger deterrence against tax evasion and fraudulent practices, while ensuring that arrests are made under strict legal safeguards.
Disclaimer: This news article is for informational purposes only and does not constitute legal advice. Readers are advised to consult relevant laws, official notifications, or legal experts for accurate guidance on matters related to tax fraud and enforcement procedures.