Karachi, July 15, 2025 – The Federal Board of Revenue (FBR) has been armed with unprecedented powers under the newly amended Section 11E of the Sales Tax Act, 1990 — a legislative shift that is set to dramatically reshape the landscape of tax enforcement in Pakistan.
The powerful new Section 11E, enforced from July 1, 2025, via the Finance Act, 2025, grants Inland Revenue officers sweeping authority to claw back unlawful refunds, inadmissible input tax, and underpaid sales tax. This transformation is more than just procedural — it’s a game-changer in how tax evasion is confronted in the country.
As per the revised Section 11E, any officer of Inland Revenue, not below the rank of Assistant Commissioner, is now empowered to initiate recovery proceedings on mere suspicion backed by audit or any credible basis. If such an officer believes that a taxpayer has either:
• failed to pay or short-paid sales tax,
• claimed undue input tax credit or refund,
• or received any refund not lawfully due,
they can issue a show cause notice, determine the exact quantum involved, and pass a recovery order with penalties and default surcharge as per sections 33 and 34 of the Act.
Critically, this aggressive recovery framework under Section 11E excludes proceedings already launched under Section 37A — signaling that Section 11E is now the go-to enforcement tool for FBR in fresh cases of refund-related irregularities.
Legal experts are calling it a “very harsh law” in the tax domain. “The scope of discretion is huge, and the burden of proof may fall squarely on businesses now,” said one Karachi-based tax consultant. “This is not just about tax recovery anymore — it’s about control.”
As Section 11E rolls into action, businesses, refund claimants, and exporters are on high alert. The FBR, already under pressure to meet aggressive revenue targets, may now find itself with turbocharged powers to crack down on suspected fraud and tax manipulation.
Whether this will increase tax compliance or trigger legal battles remains to be seen — but one thing is clear: Section 11E has changed the game.