ByFBR ends affidavit requirement for sales tax returns, simplifying compliance for businesses while maintaining efforts to curb tax fraud.
The Federal Board of Revenue (FBR) has officially revoked the affidavit requirement for filing monthly sales tax returns, a step aimed at alleviating compliance burdens for businesses. The announcement, made on January 25, 2025, came as the FBR submitted a formal request to the Sindh High Court (SHC) for the dismissal of ongoing petitions challenging the mandate.
The affidavit requirement, initially introduced in October 2024, was part of the FBR’s strategy to curb fraudulent practices such as fake and flying invoices, which significantly contribute to Pakistan’s tax gap of approximately Rs. 3.4 trillion. Under the now-defunct mandate, Chief Financial Officers (CFOs) were required to submit affidavits affirming the accuracy of their companies’ sales tax returns, including declared turnovers, taxable supplies, and the legitimacy of invoices.
This compliance measure faced criticism from businesses and CFOs, who argued that the additional verification responsibilities created undue pressure and complexity. Responding to these concerns, the SHC issued an order on November 1, 2024, prompting the FBR to review and ultimately rescind the requirement.
The FBR’s statement emphasized that the rollback addresses the grievances raised by petitioners and restores the previous verification process for sales tax returns. The move is expected to foster a more streamlined compliance process while maintaining the FBR’s commitment to combat tax fraud.
FBR Chairman Rashid Mehmood had previously underscored the seriousness of addressing tax evasion, warning CFOs against approving fraudulent invoices. He stated, “Strict legal action, including criminal proceedings, will be taken against CFOs found complicit in filing false sales tax returns.” These warnings were accompanied by stringent guidelines requiring CFOs to verify turnover accuracy, ensure legitimate invoices, and exclude fictitious figures from tax filings.
Despite the rollback, the FBR remains resolute in its mission to combat fraudulent tax practices. The removal of the affidavit requirement is seen as a pragmatic step toward balancing regulatory oversight with taxpayer convenience. Industry stakeholders have welcomed the decision, expressing optimism that it will ease compliance challenges while preserving the integrity of Pakistan’s tax system.
This development reflects the FBR’s willingness to adapt its policies to better serve the needs of businesses while maintaining accountability in tax filings. It also marks a significant step in fostering collaboration and trust between the tax authorities and the business community, paving the way for a more efficient and equitable tax system.
