FBR raises penalties for fake invoices, digital non-compliance

The Federal Board of Revenue has tightened penalties for sales tax registrants that issue bogus invoices, fail to go digital or breach production monitoring rules from July 1, 2026. Profit, citing the 2026-27 sales tax budget instructions, said the revised Section 33 penalties were set because earlier amounts had not been adjusted for a long period. Businesses that do not integrate with the FBR's computerised system or record sales and production through it now face a Rs1 million penalty.

A further fine, capped at Rs5 million, can follow if the breach lasts another month, and business premises may be sealed. Fictitious invoices now draw a penalty equal to their full value with sales tax, imposed after notice and adjudication, and offenders are placed on a publicly accessible Simulated Invoice Issuers Register. Input tax credits on such invoices are reversed from the date of listing. Removal needs the penalty and default surcharge paid in full, plus proof of compliance.

Registered persons whose input tax claims do not match the output tax declared by their suppliers face a 20% penalty on the unmatched portion, besides the reversal and default surcharge. Under Section 40C, enforcement now extends to production monitoring systems and video analytics, and taxable goods need prescribed stamps, labels or barcodes before being made, moved or sold. Officials can seize such goods and the vehicles used to carry them.