FBR splits sales tax and income tax departments into separate units

The Federal Board of Revenue (FBR) has separated the administration of sales tax and Federal Excise Duty (FED) from income tax, creating a new wing at its headquarters in Islamabad. On Friday, the FBR transferred and posted 54 Inland Revenue officials, ranging from BS-17 to BS-21, to the newly created post of Member, Sales Tax & FED (Technical).

Dr. Muhammad Sarmad Qureshi, a Grade-21 officer of the Inland Revenue Service (IRS), has been appointed as the new Member, Sales Tax & FED (Technical). While the FBR’s Board-in-Council approved this new post and revised the organizational structure, the FBR has not yet notified a post of Member, Income Tax (Technical).

According to sources, the FBR has prepared a phased plan for this separation:

On December 1, 2026, separate sales tax units will begin working in Corporate Tax Offices (CTOs) and Large Taxpayer Units (LTUs), initially under the supervision of the concerned commissioners.

On January 1, 2027, separate sales tax units will become operational in Regional Tax Offices (RTOs).

On March 1, 2027, separate Chief Commissioners for Sales Tax will be appointed.

Because a separate technical post for income tax has not been notified, income tax matters will continue to be handled by the Member Inland Revenue (Operations) and the existing income tax setup, while separate sales tax zones will be created in field formations.

Tax experts told the Business Recorder that this separation would be a serious setback for taxpayers, who would now have to report to separate Commissioners and Members, making their work more complicated in field formations. Experts questioned the rationale behind the move, noting that the federation and provinces are moving toward integrating taxes under one roof. They warned that the new hybrid model would result in a "huge shuffling" of cases and described the move as an "anti-reform measure."

Tax experts have requested the FBR Chairman to issue a detailed clarification regarding the powers and functions of the Member, Sales Tax & FED (Technical) and the remaining jurisdiction of the FBR Member Inland Revenue Operations to provide guidance to taxpayers.