FBR restricts arrest powers in sales tax fraud cases

ISLAMABAD: The Federal Board of Revenue (FBR) has withdrawn the powers of Regional Tax Offices (RTOs) to initiate criminal proceedings in sales tax fraud cases.

As per the details, under the new arrangement, the authority to investigate sales tax fraud and make arrests has been transferred to the Directorate General of Intelligence and Investigation Inland Revenue.

As per the sources, the FBR has also issued new Standard Operating Procedures (SOPs) under Section 37A for handling sales tax fraud cases.

According to the documents, cases that are already under investigation will continue to be handled by the relevant RTOs, while all new cases will now be dealt with by the Directorate General of Intelligence and Investigation Inland Revenue.

Under the Finance Act 2025, arrests will only be allowed in serious sales tax fraud cases. The documents state that action will be taken in cases involving fake or flying invoices and large-scale fraud exceeding approximately Rs50 million.

The new SOPs also require an inquiry by an officer at the Assistant Commissioner level before any arrest can be made, along with written approval from the Commissioner. In addition, approval from a special committee will be required before issuing arrest warrants.

The business community had earlier expressed concerns during the budget discussions over the possible misuse of powers granted under Section 37A.