Tax arrears recovery period slashed
Through Finance Bill 92025-26), the Federal Board of Revenue (FBR) has introduced a significant amendment to the Income Tax Ordinance, 2001.
The amendment, specifically a new subsection added to Section 140 of the Ordinance, stipulates that tax payable under an assessment order will become immediately recoverable, or within the time specified in a notice issued by the income tax authority, irrespective of timelines in other provisions or court judgments. This accelerated recovery is triggered when a tax issue is decided by a High Court or the Supreme Court of Pakistan.
A crucial proviso within this new subsection clarifies the immediate impact on appeals: 'Provided that where the High Court decides the appeal filed by the Commissioner in favor of the department under section 133, recovery shall be made after seven days from the date of the order of the High Court.'
This means that if a Commissioner's appeal against a taxpayer is upheld by the High Court, the tax arrears will become recoverable within a mere seven days from the date of the High Court's order. FBR is expected to issue further guidelines on the implementation of this amended section, particularly concerning the issuance of recovery notices and the procedures for taxpayers to adhere to the compressed timeline. Tax professionals and businesses are advised to carefully review their litigation strategies and prepare for swifter recovery actions in light of this new legal provision.
When contacted, tax lawyer Waheed Shahzad Butt stated that earlier new amendments introduced through the Tax Laws (Amendment) Ordinance, 2025 have ignited controversy across legal and tax circles, as they grant sweeping powers to tax officers to recover taxes without issuing prior notice to taxpayers. Mr. Butt warned that such unchecked powers could erode public trust in the tax system and potentially lead to abuse. This will undermine the neutrality of the taxation system and promote tax robbery moves rather than genuine tax recovery. IHC has earlier ruled that a notice under Section 138, is mandatory before initiating any coercive tax recovery action under Section 140.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
9 hours ago
- Business Recorder
China and Russia start joint drills in Sea of Japan
BEIJING: China and Russia began joint naval drills in the Sea of Japan on Sunday as they seek to reinforce their partnership and counterbalance what they see as a US-led global order. Alongside economic and political ties, Moscow and Beijing have strengthened their military cooperation in recent years, and their relations have deepened since Russia invaded Ukraine in February 2022. The 'Joint Sea-2025' exercises kicked off in waters near the Russian port of Vladivostok and would last for three days, China's defence ministry said in a statement on Sunday. The two sides will hold 'submarine rescue, joint anti-submarine, air defence and anti-missile operations, and maritime combat'. Four Chinese vessels, including guided-missile destroyers Shaoxing and Urumqi, are participating in the exercises alongside Russian ships, the ministry said. After the drills, the two countries will conduct naval patrols in 'relevant waters of the Pacific'. China and Russia have carried out annual drills for several years, with the 'Joint Sea' exercises beginning in 2012. Last year's drills were held along China's southern coast. The Chinese defence ministry said Friday that this year's exercises were aimed at 'further deepening the comprehensive strategic partnership' of the two countries. China has never denounced Russia's more than three-year war nor called for it to withdraw its troops, and many of Ukraine's allies, including the United States, believe that Beijing has provided support to Moscow. China insists it is a neutral party, regularly calling for an end to the fighting while also accusing Western countries of prolonging the conflict by arming Ukraine.
Express Tribune
13 hours ago
- Express Tribune
E-invoicing system labelled 'disastrous' for SMEs
Listen to article The Pakistan Chemicals and Dyes Merchants Association (PCDMA) has warned that an abrupt rollout of the Federal Board of Revenue's (FBR) new e-invoicing system, which took effect from August 1, 2025, could prove disastrous for small and medium-sized businesses because of the lack of preparation and consultation with stakeholders. Terming the move unfeasible and poorly timed, PCDMA Chairman Saleem Valimuhammad urged the FBR to delay implementation, arguing that most traders lacked technical infrastructure, training and the resources necessary to comply with new digital requirements. In a press statement, the PCDMA chairman labelled the sudden implementation as "unjust and disastrous" for businesses, particularly small and medium-sized enterprises (SMEs). He criticised the FBR for rolling out the system without conducting awareness campaigns, training programmes or seminars to help taxpayers comply with the new mechanism. "The FBR's schedule is completely detached from ground realities," Valimuhammad said. "Most taxpayers lack IT infrastructure, technical expertise and even stable electricity supply needed to adopt this system." He highlighted that small traders, in particular, were ill-equipped to register, issue vouchers and generate e-invoices overnight without proper guidance. The PCDMA chairman also pointed out the absence of stakeholder consultation prior to the issuance of SRO 1413 (l) 2025. He noted that many businesses had sought a 60-day extension to prepare for the transition, but the FBR had yet to provide a clear roadmap. Valimuhammad proposed a phased implementation, starting with public limited companies, followed by a performance review before extending the policy to smaller businesses. "If the e-invoicing system hasn't been fully successful for companies with turnovers exceeding Rs1 billion, how can it be imposed on small traders with even fewer resources?" he questioned. Expressing the willingness to cooperate, Valimuhammad offered PCDMA's support for industry-wide training. "If we are educated about this system, we will ensure that all our members are trained," he said. He urged the FBR chairman to defer the e-invoicing mandate until comprehensive training and awareness initiatives were in place, cautioning that the current approach risks disrupting business operations across the country.
Express Tribune
14 hours ago
- Express Tribune
Textile industry slams EFS changes
Listen to article The Pakistan Textile Council (PTC) has strongly criticised the Federal Board of Revenue's (FBR) recent amendments to the Export Facilitation Scheme (EFS), warning that the changes pose a direct threat to the survival of the country's textile and apparel exports. PTC, which accounts for over 30% of the country's textile and apparel exports, has submitted a formal set of objections and recommendations to the FBR in response to SRO 1359(1)/2025 dated July 29, 2025. The PTC's submission, in line with the five-day window provided for feedback, strongly criticises the recent amendments to the EFS, warning that the changes could paralyse Pakistan's value-added export sector at a time of heightened global economic uncertainty. It stressed that the EFS ensures competitiveness for textile and apparel exporters. However, the amendments have not only overlooked recommendations of a high-level government committee, led by Planning Minister Ahsan Iqbal, but have also introduced restrictive and impractical conditions that threaten the sector's survival. One of the most damaging provisions, according to the PTC, is the exclusion of cotton, cotton yarn and grey cloth from the scope of the EFS. "This clause must be immediately withdrawn," the council stated, as it was never agreed that those materials would be excluded. At most, a refundable general sales tax (GST) on cotton yarn above a certain count was under discussion. "Their blanket removal from the scheme is unjustified and economically reckless." PTC Chairman Fawad Anwar termed the move a "tax on exports," saying that it would impose a severe financial burden on exporters already grappling with global protectionism, rising input costs and new trade barriers, including the recently imposed reciprocal duties by the United States. "The timing could not be worse. Exporters are under stress and instead of supporting them, the government is pushing policies that increase costs and complicate operations," he said. The PTC's policy note recommended that input utilisation period should remain at 18 months, with the possibility of a six-month extension by the regulatory authority. Any extension beyond that should be subject to approval by an FBR-appointed committee. Additionally, the council suggests that unused input materials should be allowed to be carried forward into the following year upon submission of a reconciliation statement. The authorisation mechanism for input acquisition should be more flexible. For new EFS users, the regulatory authority may approve provisional authorisation up to 50% of the claimed production capacity, with the remainder granted upon capacity verification by the Input Output Coefficient Organisation (IOCO). Furthermore, annual authorisation should be automatically triggered following submission of reconciliation statements via the Web Based One Customs (WeBOC) or Pakistan Single Window (PSW) system, subject to post-audit adjustments. The council urged the FBR to shift from bank guarantees to insurance guarantees, noting that the latter would significantly reduce the compliance burden and financial stress for exporters. It highlighted the operational impracticality of new vendor restrictions in toll manufacturing. Under the current amendment, goods sent for outside processing must be returned within 60 days, vendor details must be pre-recorded and any subsequent changes require prior collectorate approval. The PTC argued that these requirements are unnecessarily rigid and disrupt operational flexibility and negotiations with sub-contractors. It urged the removal of excessive data requirements, such as vehicle numbers, and called for the extension of toll manufacturing duration. The council rejected the proposed rule mandating physical sampling to verify the utilisation of imported inputs. It called for the reinstatement of the original examination-marked sampling provisions, emphasising that the new rule would delay exports and create bottlenecks in the verification process. Finally, and most critically, the PTC demanded the immediate reversal of the exclusion of cotton, cotton yarn and grey cloth from the EFS. These materials are fundamental to the textile value chain and excluding them will force exporters to bear upfront import duties and taxes despite being net foreign exchange earners.
