Key amendments made to Finance Bill: Tax fraud arrests only post-inquiry
ISLAMABAD: The government has introduced major amendments to the Finance Bill (2025-26), barring Federal Board of Revenue (FBR) from arrest of persons involved in tax fraud at the stage of inquiry and accused arrested may approach the competent court for release on bail.
In cases of payment intermediaries and couriers in respect of digitally ordered goods from within Pakistan, the persons supplying digitally ordered goods from within Pakistan through online market place, website, software applications, the 2% of gross value of supplies would be deducted.
The FBR will issue a Negative List of services exempt from sales tax under Islamabad Capital Territory (Tax on Services) Ordinance, 2001.
FBR redrafts Sec 37A: Amended Finance Bill sets conditions for tax fraud arrests
The amended bill revealed that no arrest under this section shall be made before the completion of inquiry. The accused arrested may approach the competent court for his release on bail under the provisions contained in sections 497 and 498 of the Code of Criminal Procedure, 1898.
The purpose of prosecution under the provision of section 37A and 37B of this Act shall remain to create sufficient deterrence against tax fraud and provide for retribution for commission of tax fraud.
A three-member committee of the FBR would authorise the Commissioner to issue warrant of arrest against a person involved in tax fraud in cases where tax loss exceeds Rs 50 million.
The said arrest would be made in a situation where the accused is intentionally or wilfully not joining the investigation after three notices; accused attempting to abscond or there are sufficient grounds that the accused would temper with the evidence.
The amended Finance Bill (2025-26) has also revised penalty regime for committing tax fraud and non-filing of monthly statements by intermediaries or courier companies collecting payments from online marketplaces.
In case the person failed to obtain sales tax registration, notwithstanding anything contained in this Act or any other law for the time being in force, the Commissioner shall have the powers to direct banking companies, scheduled banks and other financial institutions, through an order in writing, to intermittently suspend the operation of the bank account of such any person for three working days.
The Commissioner shall repeat suspension specified in sub-section (2), for two more times with an interval of one week between the suspensions.
The amendments in Finance Bill have reduced sales tax on solar panels from 18 to 10 percent and Federal Excise Duty of 10 percent on Day old Chicks (DOC) of poultry sector.
The rate of tax increased from 25 percent to 29 percent on dividend received by a company from mutual fund deriving income from profit on debt.
The withholding tax has been increased from 15 to 20 percent on profit on government securities paid to any person (institutional investors) other than an individual.
The amended Finance Bill has given tax exemption to Beaconhouse National University; Federal Ziauddin University; Punjab Police Welfare Organization, Lahore and Army Officers Benevolent Fund/Benevolent Fund/Bereaved Family Scheme. The tax exemption would be available on any monetary award received from the Federal or Provincial Government or from a Public Office holder by a sportsperson winning a medal in international Olympic Games representing Pakistan. Provided that this clause shall be applicable from tax year 2025.
To bar on transfer of Immoveable Property of non-filers, the committee after affording a personal hearing to the person, shall either recommend for imposition of bar on transfer of immovable property or recommend the Commissioner to remove the bar imposed under section 14AC.
The amended Finance Bill revealed that Federal Government may, by notification in the official Gazette, subject to such conditions and restrictions as may be specified therein, exempt any country, any class of goods or services and class of persons from the chargeability under this Act, as deemed appropriate.
The amended Bill (2025) further elaborated that where an individual is deriving income under the head 'income from other source' on account of any annuity or pension, such individual shall be charged to tax on his annuity or pension income received at the rate provided in proviso to clause (2) of this Division.
According to the amended Finance Bill (025-26), the committee after affording a personal hearing to the person, shall either recommend for imposition of bar on transfer of immovable property or recommend the Commissioner to remove the bar imposed under section 14AC.
For imposition of bar on transfer of immovable property, the Committee shall recommend the Commissioner for imposition of bar on transfer of immovable property:
Provided that the Committee shall provide an opportunity to obtain registration within fifteen days prior to the recommendation.
The amended Bill 2025 revealed that where an individual is deriving income under the head 'income from other source' on account of any annuity or pension, such individual shall be charged to tax on his annuity or pension income received at the rate provided in proviso to clause (2) of this Division.'
The amended Bill revealed that a foreign vendor shall have significant digital presence in Pakistan under this Act, where the foreign vendor supplies digitally ordered services and goods from outside Pakistan to any user in Pakistan, if the aggregate amount exceeds one million rupees in a financial year along with one of the following additional factors –
(a) existence of a user base and the associated data input.
(b) billing or collection in local currency or with a local form of payment.
(c) responsibility for the final delivery of goods and services to Pakistani consumers.
(d) responsibility for the provision by the foreign vendors of other support services (after sales services, repairs and maintenance) and (e) continued marketing and sales promotion activities, online or not, to attract customers.'
For the tax treatment to NLC, the amended Finance Bill further specified that the rate of tax under clauses (b) and (c) of sub-section (1) of section 153 and sub-section (1) of section 236A to be deducted and collected from the National Logistics Corporation shall be 3% of the gross amount of payment and gross sale price of a lease of the right to collect tolls, respectively:
Provided that the tax so deductible and collected shall be minimum tax and in case the normal income tax, chargeable under Division II of Part I of First Schedule on the taxable income of the taxpayer, is higher than the amount of tax under this clause, the taxpayer shall be liable to pay the normal income tax, amended Finance Bill added.
Copyright Business Recorder, 2025
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