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ISLAMABAD: Tax experts have expressed concern that deputation of Inland Revenue officials at business/manufacturing premises of exporters under section 40B of the Sales Tax Act 1990 has been massively misused in certain cases.
On the other hand, FBR officials were of the view that the FBR is trying to depute honest tax officials at the manufacturing premises like tobacco units in KP.
Tax experts said that the fallout of revenue shortage that field formation are extensively misusing powers under section 38 and 40B of Sales Tax Act to exhort tax not legally due.
It has been further alleged that lower functionaries of the field formations pick and choose registered person and after misleading the local supervisory officer to obtain approval from the FBR regarding posting of staff at factories get them posted there on the pretext to monitor production, sales and stock position and then start blackmailing the registered person and all the supervisory officers are carried away on pretext of some revenue collected, tax experts opined.
It was explained by the tax expert that under section 40B of the Sales Tax Act 1990 subject to such conditions and restrictions, as deemed fit to impose, the Board may post Officer of the Inland Revenue to the premises of registered person.
To check any misuse of authority even by the Commissioner or Chief Commissioner power has been given to the Board only and this power ought to be exercised sparingly and that too after due diligence.
Earlier the Board has been using this power mostly in the cases sugar and cement manufacturer as a class. But now instances are growing wherein the Officer of Inland Revenue on the instigation of sales tax auditors initiate such proposal with the motive of get themselves posted.
Board in routine gives approval treating it a pro revenue initiative and a large contingent is posted as pressure tactic including guards, bailiffs, daftrietc who do not come under the definition of “Officer of Inland Revenue”.
When contacted a Lahore based tax consultant substantiated with examples where targeted proceedings are being conducted. Earlier in October 2024 Commissioner Inland Revenue authorised team to visit the business premises and do stock taking under section 38. Based on that stock taking no show cause notices were issued rather the taxpayers were pressurised to deposit more sales tax by deferring their input.
In January 2025 again those taxpayers were pressurised by the entire hierarchy of the department to once again sales tax without adjusting their input tax. The taxpayers had to succumb to the pressure as there is no legal remedy avail against orders passed under section 38 and 40B. Earlier direct appeal to the Tribunal was provided but the same was withdrawn in May 2024 and now taxpayers have no remedy against such orders.
Tax expert explained that recently such team with armed guards forcibly entered the factory of a leading leather exporter when foreign buyers were also inspecting the manufacturing facility, and it was difficult to explain what is going on.
That exporter is engaged exclusively in manufacturing of goods manufacturing for exports and it’s evident from sales tax and income tax record of over two decades and taxpayers each month is getting automated sales tax refund on exports but now the department will pressurize to pay sales tax on imaginary local sales.
Tax expert urged FBR Chairman that fact finding team be sent to Lahore to examine the instances of such administrative excesses which are marring the image of the department.
Source: Business Recorder, 2025
https://www.brecorder.com/news/40346693/...sing-power