The Federal Board of Revenue (FBR) has started suspending the sales tax registrations of corporate and non-corporate taxpayers that failed to integrate their businesses with its electronic invoicing system within the prescribed deadlines. The move has drawn concern from tax experts, who say a power meant for exceptional cases is increasingly being used as a routine enforcement tool. Arshad Shehzad, a senior tax expert, said the power to suspend a registration under Section 21 of the Sales Tax Act, 1990, is an extraordinary measure designed mainly to protect the sales tax system against fake invoicing, tax fraud, and the wrongful transfer of input tax credit through the supply chain. He made clear that the issue is not whether FBR should enforce e-invoicing, but whether a power with such serious commercial consequences should become the default response to every compliance failure.
Failure to integrate with the electronic invoicing system already attracts specific penalties under Section 33 of the Act, which is why experts argue that the administration should carefully separate routine compliance defaults from situations that genuinely warrant suspension. Shehzad noted that suspension is “not merely another penalty,” since it can disrupt the affected business and also block its customers from claiming input tax credit, meaning the impact can spread well beyond the taxpayer concerned and across the wider supply chain. He also cautioned against treating non-integration as equivalent to tax fraud, saying a missed deadline may amount to a statutory default carrying its prescribed penalty, but should not automatically be linked to fake invoicing unless the facts meet the relevant legal requirements. In his view, once suspension becomes the normal first response, the line between a penalty for non-compliance and a measure aimed at tax fraud begins to disappear.
Under the existing legal framework, a Commissioner may suspend a registration only in the circumstances listed under Section 21, and the law requires a show-cause notice within the prescribed period and an opportunity of hearing before further action is taken. Shehzad said these safeguards matter even more when suspension orders are being issued on a large scale, and he raised the question of whether they are being treated as a meaningful process or as a formality after the taxpayer has already suffered the consequences. He said FBR should clearly inform affected taxpayers of the specific basis for the action and give them a proper notice, a fair hearing, and an effective chance to demonstrate compliance, rectify technical shortcomings, or explain circumstances that may have prevented timely integration.
The issue has gained importance as FBR accelerates enforcement of the electronic invoicing regime after the integration deadlines for different categories of taxpayers expired. The rollout has run in phases since 2024, with businesses required to connect their invoicing software to the FBR system through a licensed integrator or Pakistan Revenue Automation Private Limited (PRAL), and with several deadline extensions granted along the way to corporate and non-corporate registered persons. FBR had also announced fines starting at Rs500,000 for a first violation and rising to Rs3 million for repeat offences, effective from September 2025. Tax experts said the push toward digitisation and documentation of the economy is understandable, but argued that enforcement should stay proportionate and legally structured, with the aim being compliance rather than suspension for its own sake. They added that the credibility of the regime will depend not only on how firmly the law is applied but also on whether extraordinary powers are used with restraint and procedural discipline.
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