Fake companies remain active in misusing exemptions

Shahnawaz Akhter

Several fake companies registered with the sales tax departments remained operative due to unwillingness of the Federal Board of Revenue (FBR) in taking stern action against fraudsters who obtained sales tax refunds worth billions of rupees on fake and flying invoices, official sources said on Thursday.

Pakistan Customs recently identified a number of companies engaged in importing plastic materials and claiming exemption and concessionary regime by presenting sales tax registration; however, on scrutiny, it was detected that such addresses provided by companies are non-existent.

Model Customs Collectorate (MCC) Appraisement presented challan before the Customs court against the culprits engaged in depriving the exchequer from due tax and duties, the officials said.

Some days ago, around 90 companies of plastic sector had been identified by an office of Inland Revenue Karachi in which the units jointly supported each other to obtain refunds on fake documents.

Interestingly, several companies managed to obtain refunds for the period 2011 to June 30 on invoices that had been issued by those units that were later suspended or blacklisted by the Regional Tax Office (RTO) Karachi, the officials said.

Some of the companies that obtained the refunds are those, which have provided such addresses where manufacturing facility is not possible.

Sources in the FBR said that after June 30, 2013, the RTOs in Karachi blacklisted thousands of companies, which allegedly obtained Rs40 billion illegal sales tax refunds.

The FBR has only contended with blacklisting or suspending the companies and so far avoided to take legal action against them, the officials said.

Officers at the RTO II and III said that prompt action against culprits would have prevented further revenue losses. “The chief commissioners are reluctant to take action against fraudsters, despite repeated directives issued by the FBR headquarters,” an officer said on the condition on anonymity.

The latest action taken by the MCC Appraisement West has also showed that the offices of Inland Revenue are deliberately neglecting the recovery cases, which involved around Rs40 billion in sales tax and further Rs82 billion in income tax – condition to assessment.

In a recent case, the MCC Appraisement West intercepted plastic consignments on information that some importers are indulged in fraudulent clearance of plastic moulding by availing of the facility of sales tax zero rating available in SRO 670 (I) / 2013 having no manufacturing facilities and as such not entitled for the benefit.

Under the SRO 670, the registered manufacturer of goods are entitled to get exemption of sales tax and avail of refunds condition to approval by the Commissioner of Inland Revenue.

The MCC Appraisement West intercepted the consignments and launched physical scrutiny of the provided address to check the manufacturing facility located in an industrial area of Karachi. However, the address was found to be non-existent.

Interestingly, the Inland Revenue is responsible for the issuance of sales tax registration, the sources said.

The collectorate also verified the electricity bills provided by the company from the power utility, which revealed that the power connection of the company was disconnected and bills had not been issued during November 2013 to May 2014.

The collectorate also identified more companies, which imported the plastic material by availing of the SRO 670 but their manufacturing activities were suspicious.

Source: thenews