Under the proposed Budget 2026–27, the government is planning major reforms to strengthen tax compliance by introducing heavy fines for businesses that fail to connect with the Federal Board of Revenue (FBR) digital tax system.
The measures aim to expand digital integration and curb tax evasion through stricter enforcement and automated monitoring systems.
According to the Finance Bill, businesses that do not digitally connect with the FBR within the prescribed timeline will face a fine of up to Rs 1 million.
Officials also proposed that repeated violations could result in penalties as high as Rs 5 million.
In addition, authorities may seal businesses that continue to remain outside the digital tax system despite repeated warnings.
Crackdown on fake and fictitious invoices
The budget proposals also include strict action against the issuance of fake or fictitious tax invoices.
Under the proposed framework, individuals or businesses involved in fake invoicing may be fined the full value of the invoice.
Authorities are also planning to introduce a public list of those involved in issuing fake invoices to increase transparency and deterrence.
The Finance Bill suggests the introduction of an automated enforcement system to detect and act against fake invoices more efficiently.
Any tax credit obtained through fraudulent invoices will be automatically cancelled under the new system.
Additionally, discrepancies between input and output tax may attract a penalty of up to 20 percent.
Stricter action against tax evasion practices
The proposed reforms also include penalties for incorrect input tax claims, which will be subject to surcharges and additional fines.
Buyers dealing with suppliers issuing fake invoices may also face legal and financial consequences.
Furthermore, taxpayers failing to return wrongly claimed tax credits within 60 days may be charged an additional 20 percent penalty.
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