FBR limits arrest warrants in sales tax fraud cases to fake or flying invoices

Tax body clarifies arrest provisions, ensuring warrants are only sought in cases involving fake or flying invoices under the Sales Tax Act

The Federal Board of Revenue (FBR) clarified on Monday that arrest warrants would only be issued in sales tax fraud cases involving fake or flying invoices.

The FBR’s clarification came through an explanatory circular regarding the Sales Tax Act, 1990, addressing the arrest provisions under Section 37A. A key demand from the business community was to limit arrest powers to cases of fraudulent invoices.

According to the circular, arrest warrants may only be obtained for serious sales tax frauds, including cases involving fake or flying invoices, when specific pre-conditions are met. These include: the possibility of the accused tampering with documents, absconding, or failing to cooperate with investigations despite receiving three notices.

The FBR also announced that a detailed procedure and restrictions for these provisions will be issued in a Sales Tax General Order (STGO) to facilitate the smooth implementation of subsections (8) and (9) of Section 37A.

Additionally, the FBR has separated criminal and civil liabilities, distinguishing between non-compliance and fraudulent activities. The revised provisions clarify that non-payment of tax due to collusion or deliberate actions falls under criminal proceedings as per Section 37A, while non-compliance will be addressed separately under Section 11E.

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