Authorities start criminal proceedings against 44 textile units

KARACHI: The tax authorities have initiated criminal proceedings against some textile companies on allegations that they failed to deposit sales tax collected on supplies from unregistered persons to the national kitty, official sources said on Wednesday.
The action has been taken on suspicions that the companies claimed refunds against those invoices issued to a registered person, who died and his company was not operative.
“Claiming refunds against invoices issued to such inoperative unit means the supplies were made to unregistered persons where sales tax was collected, but not deposited in the exchequer,” an official at the Large Taxpayers Unit (LTU) Karachi said.
Around 44 companies are under investigation and in some cases fraud has been established, the official said, adding, these companies are registered with different tax offices in the country.
Under the SRO 1125, the registered textile unit can claim difference of input and output. In the cases of supplies by a registered person to another registered person, 100 percent refund of input can be claimed.
On the other hand, making supplies to unregistered person five percent sales tax is levied and a registered person is liable to pay the differential amount after adjusting the input tax.
In the instance case, the supplies have been made to a company whose owner died, but some unscrupulous persons kept the unit alive to issue fake invoices.
Another official at the Regional Tax Office (RTO) Karachi said the cases have been identified where supplies have been made to such a person who died in 2011 and his legal heirs denied any activities of the company since then.
The official said the local authorities issued notices to a company, Abu-al-Qasim Textile, House, Faisalabad to verify the documents presented by the textile units registered in Karachi to clear the refunds. But after repeated intimations, the authorities requested the RTO Faisalabad to intervene the case and verify the taxpayer.
The RTO Faisalabad in its report said the owner of the unit had been expired on March 8, 2011 in Saudi Arabia and the unit has not done any business thereafter.
Furthermore, the RTO presented another evidence the registered person had made zero-rated purchases of Rs981 million from leading companies and supplies worth Rs844.13 million from those companies that had denied any business with the company for the period April 2011 to July 2013.
In the case of Abu-al-Qasim Textile, the RTO Faisalabad said the registered person is involved in tax fraud by issuing fake and flying purchase and sales invoices in connivance with its suppliers.
“The registered person only carried out paper transactions without any physical transfer of goods and has indulged in issuance of such invoices,” the RTO Faisalabad said.
The LTU Karachi official said scrutiny of claims by a unit, which made supplies to a fake company, that revealed further 14 transactions to fake and bogus companies registered with different RTOs in the country.