Finance Minister Reveals Rs 3.4 Trillion Sales Tax Evasion, Announces Crackdown on Major Sectors
Islamabad—Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, revealed on Thursday that sales tax evasion across various sectors amounts to Rs 3.4 trillion, nearly half of the total Rs 7 trillion in tax theft in Pakistan. The announcement was made during a press conference alongside Federal Board of Revenue (FBR) Chairman, Rashid Mahmood Langrial, where findings from a comprehensive FBR study on sales tax evasion were discussed.
The study highlighted widespread tax fraud, showing that only 14% of the 300,000 manufacturers liable to register for sales tax have done so. Additionally, many registered entities have been misreporting their turnover, claiming excess input tax, and using fake invoices.
Sales tax in Pakistan is collected through a Value-Added Tax (VAT) system, where businesses are responsible for collecting tax from buyers. However, according to the finance minister, this trust has been “breached on a massive scale.” The study analyzed tax evasion across five key sectors: iron and steel, cement, beverages, batteries, and textiles, where significant malpractices were uncovered.
In the iron and steel sector, 33 large businesses, representing over 50% of total sales, evaded Rs 29 billion in sales tax by claiming excess input tax, primarily through scrap metal and coal purchases. Similarly, the battery sector saw six cases, covering 99% of total sales, where Rs 11 billion in excess input tax was claimed via lead purchases.
