ISLAMABAD: The Federal Board of Revenue (FBR) has issued a Standard Operating Procedures (SOPs) for initiating inquiries, investigations, prosecutions, and arrests under Section 37A of the Sales Tax Act in cases of tax fraud during assessment proceedings. The FBR’s Inland Revenue (Operations) Wing has communicated these instructions through an SOP to field formations and the Directorate General of Intelligence and Investigation Inland Revenue. Official sources told Business Recorder that the criminal prosecution in tax fraud cases would now be processed by the Directorate General of Intelligence and Investigation Inland Revenue. READ MORE: Tax fraud arrests: FBR names business representatives to be consulted The FBR’s Operations Wing would not deal with the criminal prosecution in tax fraud cases under the section 37A of the Sales Tax Act. The cases of the criminal prosecution would be forwarded to the directorate which would dully follow all procedure already prescribed under Finance Act 2025 and relevant notifications/circulars. Top officials dispelled fear of the business community that the cases would be prosecuted without consultation of the notified committees of the business and trade. The SOP has not bypassed or ignored already laid down FBR’s procedure in this regard. The civil and criminal liability has been separated after court orders. The civil liability against the taxpayer has to be created first before the criminal liability, they said. Official admitted that the business community is never happy to appear before the Directorate General of Intelligence and Investigation Inland Revenue, but they are more comfortable with the FBR’s field offices. The recent modifications to Section 37A, was introduced in the last Finance Act, have caused significant concern among trade bodies and the business community. In response, the government at that time, after consulting with these trade organizations, has assured introducing measures to mitigate any potential abuse of authority under this provision. Explaining the core issue, Arshad Shehzad, a renowned legal expert, discussed some of the main concerns raised by the trade bodies, particularly regarding the amended definition of tax fraud and the potential for unchecked charges when invoking proceedings under Section 37A. He informed in the budget anomalies exercise, following the government intervention and discussions with the FBR’s leadership, it was agreed that only cases demonstrating a significant element of tax fraud would be referred to the Directorate General of Intelligence for further action under Section 37A. This decision aims to exclude any minor charges that might otherwise fall under the definition of tax fraud. He further informed this matter was also came under serious discussion in Senate Finance Committee at that time, which was also attended by him, In that post budget meeting in the presence of representative of trade bodies, FBR officials clarified that the invocation of Section 37A does not imply the immediate arrest of any businessman or taxpayer without adhering to the due process outlined in Section 37(8) of the Act. Arshad Shehzad however, emphasized the importance of the FBR clarifying this position to alleviate any unrest and anxiety within the business community regarding the issuance of the SOP as generally people may not aware with the complete back ground and need for issuing this SOP at this point in time, leading Karachi based legal expert added. Copyright Business Recorder, 2026