New law links active taxpayer status to timely return filing, input tax claims, government licences and public procurement contracts.
LAHORE: The Punjab government has introduced a stricter definition of an active taxpayer through the Punjab Finance Act, 2026, making timely filing of tax returns a key condition for maintaining active status and accessing tax benefits, government licences and public contracts.
The amendments, made to Section 2(1) of the Punjab Sales Tax on Services Act, 2012, are aimed at improving tax compliance and strengthening enforcement by the Punjab Revenue Authority (PRA).
Stricter criteria for active taxpayer status
Under the revised law, an active taxpayer is a registered person:
• Whose registration has not been suspended or blocked by the PRA; and
• Who has not failed to file a tax return by the prescribed due date for the two most recent consecutive tax periods.
Previously, a registered person qualified as an active taxpayer by filing a tax return for at least one of the preceding three consecutive tax periods.
The amendment introduces a much stricter standard, under which taxpayers will lose active status if they fail to submit returns on time for the last two consecutive tax periods.
Input tax adjustment linked to Active Taxpayers List
The Punjab Finance Act, 2026 has also tightened restrictions related to active taxpayer status.
A new clause (f) in Section 16B(1) disallows the adjustment of input tax on goods or services acquired against invoices issued by persons who do not appear on the Active Taxpayers List (ATL) maintained by either the Punjab Revenue Authority or the Federal Board of Revenue (FBR).
Officials said the measure is intended to discourage transactions with non-compliant businesses and improve documentation of the tax system.
PRA granted wider enforcement powers
The Finance Act has also replaced Section 76A of the Punjab Sales Tax on Services Act, significantly expanding the enforcement powers of the Punjab Revenue Authority.
Under the amended provision, the PRA will no longer require prior approval from the provincial government before exercising its powers to enforce taxpayer compliance.
Licences and government contracts linked to ATL
The revised law extends compliance requirements beyond licences, permits and no-objection certificates (NOCs).
The PRA can now direct authorities responsible for issuing or renewing licences, permits and NOCs, as well as government procuring agencies, to verify that applicants, contractors, bidders, suppliers and consultants:
• Are registered under the Punjab Sales Tax on Services Act, 2012; and
• Appear on the Active Taxpayers List.
Businesses failing to meet these requirements may be denied licences, permits, NOCs or eligibility for government contracts.
Relief for newly established businesses
The Finance Act provides a six-month exemption for newly established businesses, allowing them time to complete registration and fulfil compliance obligations before the new restrictions become applicable.
Officials said the exemption is intended to support start-ups and new enterprises while maintaining the government’s broader compliance objectives.
Tax experts noted that the amendments significantly increase the importance of active taxpayer status by linking it not only to tax benefits but also to commercial activities and participation in public procurement.
They added that the new framework supports Punjab’s efforts to expand the documented economy, strengthen tax enforcement and ensure that incentives and government opportunities remain available only to compliant taxpayers.