FBR Introduces Penalties And Seizures For Fake Invoice Violations

The Federal Board of Revenue (FBR) has introduced severe penalties to discourage the issuance of fake or “flying” invoices. A registered taxpayer found, after receiving notice and undergoing adjudication, to have issued invoices for fabricated transactions or supplies that never occurred will be required to pay a penalty equivalent to the total invoice value, including sales tax.

The concerned taxpayer will also be added to a publicly accessible “Simulated Invoice Issuers Register.”

Any input tax credit claimed against invoices issued by a person listed in the register will be automatically reversed and declared inadmissible from the date of their inclusion. Removal from the register will only be considered after the complete payment of the penalty and default surcharge, along with satisfactory proof of compliance.

Registered persons whose input tax claims cannot be reconciled with the corresponding output tax declared by their suppliers will face a penalty equal to 20% of the unmatched input tax. They will also have to bear the reversal of the inadmissible credit and pay the applicable default surcharge.

Another 20% penalty will be imposed on taxpayers who fail to reverse, within 60 days, input tax claimed against invoices issued by a person already included in the Simulated Invoice Issuers Register.

The FBR has also widened enforcement powers under Section 40C to include production-monitoring systems, video analytics and other prescribed monitoring arrangements.

Taxable goods covered by these requirements cannot be manufactured, removed, transported or supplied without the prescribed tax stamps, stickers, labels, barcodes or compliance with the relevant monitoring system.

The amendments further authorize the authorities to seize and confiscate taxable goods that fail to meet compliance requirements, along with the vehicles used to transport them.