VAT & SD Act 2012
Section 127 - Imposition of interest on payable tax
(as updated till Finance Ordinance 2025)
(1) If a person fails to pay a tax, payable to 1[the Commissioner or the appropriate officer mentioned in the table of section 86] 2[or irregularly accepts rebate or decreasing adjustments] on or before the due date of payment, he shall be liable to pay an interest at a simple rate of 3[1 (one) percent per month] on the amount of payable tax, from the next day after the date the payment becomes due to the date the payment is made 4[:
But provided that in the case of realization of arrear arising from VAT deduction at source, six-monthly 2 (two) percent simple interest shall require to be paid on the payable amount of tax.]
5[ Explanation.- In this sub-section “till the date of payment” means till the date of payment inclusive of the time of disposal from the next date of the ascertained date, but not more than 24 (twenty-four) months.]
(2) The Commissioner shall recover the interest from such person in the same manner as taxes are recovered from him.
(3) If a person pays an interest and an amount to which the interest relates is found not to have been payable, the interest paid on such amount shall be refundable to such person.
(4) Interest shall be payable in addition to any penalty or fine.
1 The words “the Commissioner” were substituted by section 80(a) of the Finance Act, 2022 (Act No. 13 of 2022) with effect from 01 July 2022.
2 The words “or irregularly accepts a rebate or decreasing adjustment” were inserted by section 25 of the Finance Ordinance, 2025 (Ordinance No. 28 of 2025) with effect from 01 July, 2025.
3 The words “monthly 2 (two) percent” were substituted by section 57 of the Finance Act, 2021 (Act No. 11 of 2022).
4 The symbol (:) was substituted for the symbol (.) and proviso was inserted by section 103 of the Finance Act, 2019 (Act No. 10 of 2019) with effect from 01 July 2019.
5 Explanation of Section 127(1) was substituted by section 80(b) of the Finance Act, 2022 (Act No. 13 of 2022) with effect from 01 July 2022.
Disclaimer: This is the authentic English text of The Value Added Tax and Supplementary Duty Act 2012, as published under SRO No. 440-Law/2025/326-Mushak dated 05 November 2025. In the event of any inconsistency or conflict between the content on this website and the official Government publications or gazette notifications relating to laws, rules, regulations or SROs, the official Government publications and notifications shall prevail.