Allegations of misconduct have emerged within the Federal Board of Revenue (FBR), as field formations across Pakistan are reportedly pressuring sales tax registrants to deposit sales tax payments without undergoing the legally mandated adjudication process. According to leading tax experts, this practice stands in direct violation of the Supreme Court’s binding principles and undermines the integrity of the country’s tax administration framework.
Sources within the tax community reveal that several registered taxpayers have been subjected to coercive tactics, with officials threatening suspension of sales tax registration if upfront payments are not made. One prominent taxpayer, contributing over Rs.12 billion annually in duties and taxes and currently assessed under Zone-IV, Large Taxpayers Office (LTO), Lahore, has lodged a formal complaint outlining these irregular practices.
According to the taxpayer’s application for change of jurisdiction, the Commissioner issued an “opportunity notice” on September 15, 2025, accusing the company of committing tax fraud on two grounds: allegedly claiming inadmissible input tax of Rs.11,097,347 during the 2024–2025 period, and declaring exempt supplies worth Rs.872,792,811 in the Federally and Provincially Administered Tribal Areas (FATA/PATA), which the department claimed were taxable and carried an additional liability of Rs.157,102,705.
In response, the taxpayer’s Authorized Representative (AR) refuted both allegations in a detailed reply dated September 20, 2025. The representative clarified that the majority of the input tax in question—Rs.10,260,681—had already been voluntarily reversed in monthly returns, while the remaining Rs.836,666 was legitimately claimed in accordance with prior appellate and Supreme Court rulings. Regarding the exempt supplies, the AR maintained that they were rightly claimed under the relevant entry in the Sixth Schedule of the Sales Tax Act, applicable at that time.
The taxpayer further highlighted that an earlier show-cause notice issued by the Deputy Commissioner Inland Revenue (DCIR) in June 2025 acknowledged the exemption and only raised the issue of apportionment, not taxability. In compliance, the taxpayer had already deposited Rs.136,020,935, exceeding the amount originally confronted by the DCIR. Despite this, the Commissioner allegedly demanded an upfront payment of Rs.500 million as a precondition for avoiding suspension of the sales tax registration.
When the taxpayer declined to comply, the Commissioner issued a suspension order on September 24, 2025, deactivating the registration in the IRIS system. The order, according to the taxpayer, was “non-speaking” and lacked any substantive reasoning or acknowledgment of the detailed response provided.
Subsequently, the Appellate Tribunal Inland Revenue intervened, granting a stay order on September 30, 2025, and directing the immediate restoration of the taxpayer’s registration. However, even after the Tribunal’s decision, the Commissioner allegedly continued to delay reinstatement, insisting that the taxpayer first deposit Rs.700 million to “resolve the issue.”
Legal experts argue that such actions constitute a serious breach of procedure and disregard for judicial precedent. The Supreme Court, in its 2025 ruling (2025 PTD 1270–132 TAX 151), clearly established that proceedings related to tax fraud must follow an assessment under Section 11 of the Sales Tax Act, 1990, before any punitive measures like suspension or cancellation of registration can be taken.
Tax consultant Shahid Jami, commenting on the situation, stated that issuing show-cause notices for suspension has become a routine practice across FBR offices. “This has effectively turned into a shortcut to force taxpayers into making payments. The suspension halts business operations entirely, leaving taxpayers with no choice but to comply,” he said. Jami urged the FBR’s top management to initiate an internal audit of all such suspension cases and take disciplinary action against officials found misusing their powers.
He emphasized that these arbitrary suspensions harm not only compliant taxpayers but also the government’s own revenue collection. “When a company’s registration is suspended, its operations freeze, and no further tax inflows occur. Such actions are counterproductive and reflect a lack of accountability within the system,” Jami added.
The case has reignited debate about administrative abuse and the need for institutional reform within Pakistan’s tax machinery. Experts argue that transparent adjudication, fair audits, and strict adherence to due process are essential to rebuild trust between taxpayers and the revenue authority.
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