ISLAMABAD: The Federal Board of Revenue (FBR) has introduced a new legal framework requiring taxes and other government dues to be recovered before any remaining proceeds from the auction of confiscated goods are paid to their owners.
The new provision has been incorporated into the Sales Tax Act, 1990 through the Finance Act, 2026 by inserting Section 40F, which lays down the procedure for the disposal of confiscated goods through public auction.
Public Auction Mandatory
Under the newly inserted Section 40F, all goods confiscated under the Sales Tax Act, 1990 will be sold through a public auction, without affecting any other legal proceedings that may be initiated in relation to the confiscated goods.
The amendment also authorises the FBR to conduct auctions electronically in accordance with procedures prescribed by the Board, reflecting the government’s broader efforts to modernise tax administration through digital processes.
In addition, all auctions must be conducted in compliance with the Public Procurement Regulatory Authority (PPRA) Rules, 2004, ensuring transparency and adherence to established procurement standards.
Priority for Tax Recovery
The Finance Act, 2026 specifies the order in which proceeds generated from the auction of confiscated goods will be distributed.
Under Section 40F, the auction proceeds will first be used to meet the expenses incurred in conducting the auction.
The remaining amount will then be utilised to recover sales tax, other federal taxes, penalties, default surcharges and any other dues payable to the Federal Government in respect of the confiscated goods.
Only after these liabilities have been fully settled will any remaining balance be paid to the owner of the confiscated goods, except where the goods are liable to outright confiscation under the law.
Six-Month Time Limit for Owners
The amendment also introduces a six-month deadline for owners to claim any remaining balance from the auction proceeds.
If no claim is submitted within six months from the date of the auction, the unclaimed amount will be deposited into the government treasury.
Furthermore, where a goods declaration has already been filed, the importer’s entitlement from the auction proceeds cannot exceed the declared value of the confiscated goods.
Strengthening Revenue Recovery
Tax experts believe the introduction of Section 40F strengthens the government’s ability to recover outstanding tax liabilities before surplus funds are returned to owners of confiscated goods.
The amendment also enhances transparency by introducing electronic auctions and requiring compliance with the PPRA Rules, 2004. It forms part of the wider tax administration reforms introduced through the Finance Act, 2026 to improve enforcement, streamline disposal procedures for confiscated goods, and safeguard government revenue.
