ISLAMABAD: The All Pakistan Textile Mills Association (Aptma) has raised serious concerns over proposed amendments to the Sales Tax Act, 1990 and warned that the Federal Board of Revenue’s (FBR) latest anti-fraud measures could end up penalising compliant businesses for actions committed by others.
In a detailed representation submitted to FBR Chairman Rashid Mahmood Langrial, Aptma has urged the government to reconsider key provisions introduced through the Finance Bill 2026, arguing that while the industry fully supports efforts to eliminate tax fraud and fake invoicing, the proposed framework unfairly shifts the burden of enforcement onto genuine taxpayers.
The representation, signed by Chairperson of Aptma Kamran Arshad, focuses on the proposed insertion of Serial Nos 30 and 31 in Section 33 of the Sales Tax Act. According to the association, these provisions, in their current form, could expose law-abiding businesses to recovery proceedings, default surcharge and substantial penalties despite having fulfilled all statutory obligations.
Aptma noted that superior courts have consistently held that penal consequences should ordinarily be linked to evidence of fraud, collusion, deliberate concealment, wilful misstatement or conscious participation in tax evasion. The association argued that the proposed amendments fail to distinguish between a taxpayer knowingly involved in fraudulent conduct and a taxpayer who has complied with the law and relied upon the information available through the FBR’s own computerised systems.
A major concern highlighted in the representation relates to the operation of the FBR’s STRIVE system and the existing electronic invoice verification regime. Under the current framework, a registered purchaser is permitted to claim input tax only when the supplier’s invoice is reflected in the FBR’s computerised database. Businesses therefore rely on information generated, processed and validated through the tax authority’s own infrastructure before claiming input tax.
Aptma argued that where an invoice is available on the system and the purchaser has met all documentary and statutory requirements, the taxpayer should not subsequently be penalised because of a mismatch, amendment, omission or reporting failure attributable to the supplier. The association warned that imposing penalties under such circumstances will undermine confidence in the very digital systems introduced by the tax authority to facilitate compliance.
Regarding Serial No. 30, the association said taxpayers could face reversal of input tax, default surcharges and a 20 per cent penalty if claimed input tax cannot be matched with a supplier’s output tax declaration. Aptma noted that such mismatches often arise from legitimate reasons, including filing delays, clerical errors, technical glitches or supplier reporting mistakes, rather than fraud. It warned that compliant businesses with valid invoices, complete documentation and bank-recorded payments could still be exposed to significant liabilities. To address this, Aptma proposed that penalties should only apply after the relevant determination is upheld by the Tribunal, providing an additional appellate safeguard.
The association expressed even stronger opposition to Serial No 31, which concerns transactions with suppliers later placed on the Simulated Invoice Issuers Register. Aptma argued that the proposal will effectively make purchasers responsible for monitoring the future compliance status of suppliers, even when transactions were conducted legally and in good faith. It said this will impose impractical compliance burdens on industries such as textiles, increase costs, create uncertainty, disrupt supply chains and lead to more litigation.
Aptma also questioned the legal and constitutional validity of Serial No 31, arguing that it does not explicitly guarantee taxpayers a show-cause notice or a hearing before adverse action is taken, potentially conflicting with due process protections under Article 10-A of the constitution.
The association has urged the FBR to withdraw Serial No 31 and amend Serial No 30 to include the proposed appellate safeguard, while reiterating its support for anti-fraud measures that distinguish between deliberate tax evasion and genuine commercial transactions.
