20pc penalty imposed on incorrect input tax credit claims
“Taxpayers making incorrect or mismatched input tax credit claims will face a 20 per cent penalty in addition to repayment of the tax amount and default surcharge under the Finance Act 2026-27. The new …”
The new provision also imposes a 20pc penalty if tax credit claimed against fake invoices is not repaid within 60 days., the Federal Board of Revenue’s (FBR) computerised system will identify cases where input tax credit claimed by a registered taxpayer for a particular tax period does not correspond with the output tax declared by the relevant supplier during the same or a nearby tax period.
If the discrepancy remains unresolved after the taxpayer is served a notice, given an opportunity to explain the matter and provided a hearing, the taxpayer will be required to reverse the inadmissible input tax credit.
In addition to repaying the disputed input tax amount, the taxpayer will have to pay a penalty equal to 20pc of the mismatched input tax amount. The taxpayer will also be liable to pay default surcharge under Section 34 of the Income Tax Act, the Finance Act.
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The measures are aimed at tightening monitoring of input tax claims and preventing the misuse of the tax credit mechanism through incorrect claims and fake invoices.
Written by Ali Khan
Aman-e-Pakistan Senior Journalist & Bureau Reporter
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