The Federal Board of Revenue (FBR) has the authority to conduct special sales tax audits under the Sales Tax Rules, 2006, updated for the tax year 2026. These audits ensure compliance with Pakistan’s sales tax laws and help registered businesses maintain accurate records.
This guide breaks down the scope, rules, and procedures for special audits and explains how businesses can prepare for them.
What is a Special Sales Tax Audit?
A special audit is a detailed review of a registered taxpayer’s records, invoices, and monthly returns by an FBR-appointed special auditor. It is conducted under Section 32A of the Sales Tax Act, 1990, and is applicable to specific registered persons or classes of registered persons.
Key Objectives:
• Ensure compliance with sales tax laws
• Verify accuracy of tax invoices and returns
• Confirm proper calculation and reporting of input, output, and net sales tax
Legal Framework for Special Audit (2026 Update)
The rules governing special audits are outlined in Chapter VIII of Sales Tax Rules, 2006, updated for 2026.
Rule Description
Rule 40 Application – Applies to registered persons subject to special audit under Section 32A.
Rule 41 Special Audit – FBR may appoint a special auditor to review records, tax invoices, and monthly returns.
Rule 42 Scope of Audit – Focuses on correctness of records and returns, including:
• All taxable supplies reflected in records and invoices
• Input tax, output tax, and net sales tax compliance
Rule 43 Form of Audit Report – Auditor submits findings in the prescribed format.
Rule 44 Penalty – Non-compliance can result in withholding or refund of audit fees, along with other professional penalties.
Scope of Special Audit
The scope of the audit emphasizes accuracy, compliance, and documentation.
Key Focus Areas for Auditors:
1. Records and Invoices
o Are records maintained accurately?
o Are tax invoices issued correctly?
2. Monthly Returns Verification
o Do returns reflect all taxable supplies in the tax period?
o Are input tax, output tax, and net payable/refundable amounts substantiated by records?
3. Professional Opinion
o The auditor expresses a professional opinion on whether the taxpayer’s records and returns comply with the law.
Penalties & Fee Adjustments
Non-compliance during a special audit can result in:
• Withholding of auditor’s fee
• Refund of any fees already paid within one week of notice
• Professional action under relevant chartered accountant or management accountant laws
How to Prepare for a Special Audit
Businesses can minimize risks and ensure smooth audits by:
• Maintaining complete and accurate sales records
• Ensuring all invoices and returns are correctly issued
• Keeping supporting documents for input and output tax claims
• Coordinating with auditors to clarify any discrepancies
FAQs – Special Sales Tax Audit
Q1: Who can be selected for a special audit?
A1: Any registered person or class of registered persons under Section 32A of the Sales Tax Act.
Q2: What documents are required for the audit?
A2: Tax invoices, monthly returns, input/output tax records, and any documents supporting sales tax calculations.
Q3: What happens if a business fails the audit?
A3: Auditor fees can be withheld, and further penalties may apply under professional or tax laws.
Q4: Is there a prescribed format for the audit report?
A4: Yes, the auditor must submit the report in the Form specified in the terms of reference by FBR.
Conclusion
The FBR special sales tax audit 2026 ensures businesses adhere to sales tax laws and maintain proper documentation. By understanding the rules, scope, and penalties, businesses can stay compliant and avoid unnecessary fines.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Businesses should consult FBR or a qualified tax professional for guidance.