FBR Takes U-Turn on Arrest Powers After Pressure from Business Community

The Federal Board of Revenue (FBR) has restricted powers of arrests of the Inland Revenue officials and now warrant of arrest from judge would only be obtained in the sales tax fraud cases of fake and flying invoices. The FBR has clarified arrest powers under the Finance Act 2025 through a sales tax explanatory circular issued on Monday. The FBR has clarified to the business community that the warrant of arrest from judge under subsection (9) of section 37A of the Sales Tax Act may be obtained primarily in the sales tax frauds which are heinous or material including fake and flying invoices. Under this subsection, the following pre-conditions shall also apply as is the case of arrest under subsection (8) of section 37A: ln addition to that, the board will separately notify the detailed procedure, preconditions and restrictions through a sales tax general order (STGO) for the smooth operation of subsections (8) and (9) of Section 37A of the Sales Tax Act, FBR added. A new sub-section (4) in section 37 has been inserted to empower the officer of lnland Revenue to exercise the powers of civil court under the Code of Civil Procedure, 1908. The FBR has also separated criminal and civil liability to differentiate between non-compliance and fraudulent activities. Sub-section (1) of section 11E has been substituted where by non-payment of tax through collusion or deliberate act are excluded from its scope, because the provisions of law already exist in this Act under section 37A for initiation of criminal proceedings in such non-payments. Similarly, the provisions of section 11E shall not be applicable to the extent where proceedings have been initiated under section 37A. This differential between proceedings under section 11E and section 37A is important as the former deals with non-compliance whereas latter deals with the fraudulent activities.