FBR’s Sudden Move to Penalize Non-Integrated Taxpayers Draws Business Community’s Ire

FBR’s Sudden Move to Penalize Non-Integrated Taxpayers Draws Business Community’s Ire

In what appears to be a significant policy reversal, the Federal Board of Revenue (FBR) has issued instructions to initiate penalty proceedings against taxpayers who have not yet integrated their systems with the FBR’s digital invoicing mechanisms.

This directive, communicated via official letter No. F.No.1/D(DI)/MISC/2025/89249-R dated July 18, 2025, from the Directorate General of IT & Digital Transformation (IT&DT), mandates all Large Taxpayer Offices (LTOs), Regional Tax Offices (RTOs), Medium Tax Offices (MTOs), and Corporate Tax Offices (CTOs) to issue penalty notices to non-integrated businesses under Rule 150Q of the Sales Tax Rules, 1990, read with SRO.709(I)/2025.

The move has come as a surprise and a shock to the business community, especially in light of recent consultations held between FBR representatives and trade bodies, including the Karachi Chamber of Commerce and Industry (KCCI). During those discussions, the FBR had assured that the implementation of integration would follow a phased and structured approach, starting with public listed companies, followed by importers and businesses with annual turnover exceeding Rs. 1 billion, and so on. The intent, as conveyed by FBR, was to ensure minimal disruption and promote trust-based compliance.

However, the abrupt decision to penalize all non-integrated taxpayers, without honoring the agreed roadmap, has raised serious concerns among stakeholders. Business leaders view the move as a breach of trust and a backtrack from FBR’s previously stated commitment.

“This is not just a breach of commitment; it’s a blow to business confidence,” remarked a senior tax consultant. “FBR’s unilateral move, without giving businesses the promised transition period, contradicts the very spirit of partnership and reforms.”

What has further frustrated the business community is the perception that FBR is quick to penalize but slow to provide relief. While notices and penalties are fast-tracked, multi-billion-rupee refunds of businesses remain unsettled for months, even years, significantly affecting cash flows and working capital.

The letter emphasizes that the matter should be treated as a “Top Priority”, indicating an imminent and aggressive compliance drive.

At a time when Pakistan is striving to broaden its tax base and increase documentation, coercive enforcement without consultation risks undermining reform efforts. The business community has called upon the FBR to immediately withdraw or defer the notice, and resume stakeholder consultations to revisit the implementation strategy in good faith, focusing on facilitation rather than fear.