FBR Addresses Business Community Concerns on Arrest Warrants

ISLAMABAD: The Federal Board of Revenue (FBR) has responded to the business community’s worries by announcing that arrest warrants from a judge will only be secured in sales tax fraud cases involving counterfeit and deceptive invoices.

According to a sales tax explanatory circular released by the FBR on Monday, the FBR clarified the arrest-related clauses within the Sales Tax Act of 1990. A key demand from the business community was to restrict arrest powers to instances of fraudulent or deceptive invoices.

The FBR has assured the business sector that arrest warrants from a judge, as per subsection (9) of Section 37A of the Sales Tax Act, will primarily be sought in significant sales tax fraud cases, notably those concerning fake and flying invoices. The following prerequisites will also be applicable under this subsection, mirroring the conditions for arrests under subsection (8) of section 37A:

  • The accused may tamper with documents.
  • The accused may attempt to flee.
  • The accused fails to cooperate with investigations, despite being served three notices.

Furthermore, the board will issue a separate notification detailing the procedures, preconditions, and limitations via a Sales Tax General Order (STGO) to ensure the effective implementation of subsections (8) and (9) of Section 37A of the Sales Tax Act, the FBR stated.

The FBR has also distinguished between criminal and civil liabilities to differentiate between non-compliance and fraudulent activities. Sub-section (1) of section 11E has been amended to exclude non-payment of tax through collusion or deliberate acts from its scope, as Section 37A of the Act already provides for initiating criminal proceedings in such cases of non-payment.

Similarly, the provisions of section 11E will not apply where proceedings have commenced under section 37A. This distinction between proceedings under section 11E and section 37A is crucial, as the former addresses non-compliance, while the latter targets fraudulent activities.