Alvi dismisses FBR’s plea in ‘inadmissible tax refund’ case

ISLAMABAD: President Arif Alvi has dismissed representation filed by the Federal Board of Revenue (FBR) and directed the tax authorities to restore the investigation against M/S Millat Tractors Ltd (MTL) on an alleged inadmissible sales tax refund of over Rs12 billion.

While addressing a press conference on Wednesday at the FTO Headquarters, Almas Ali Javinda, Advisor (Legal), Muhammad Nazim Saleem, Advisor (Sales Tax), and Muhammad Naseer Butt, Advisor (Income Tax) stated that the president has dismissed representations filed by the FBR and endorsed the order of the FTO for initiation of recovery proceedings against the company.

FTO Advisor (Sales Tax) Nazim Saleem said that the gist of the issue is that MTL had charged 5 percent sales tax from the buyers on their tractors but failed to deliver tractors before June 30, 2022, in sheer violation of definitions of ‘time of supply’ as stipulated in section 2(44) of the Sales Tax Act 1990. The FBR officials ignored and neglected all violations committed by the said company.

Equally important is the fact that sales tax was abolished on the supply of tractors w.e.f July 1, 2022. When the complainants approached MTL for a refund, they refused to entertain their requests. Consequently, these buyers filed complaints against MTL before the FTO, FTO Advisor (Sales Tax) added.

President’s order said that the FBR has initiated a refund audit and sales tax audit of the said company, which will reach its logical conclusion. Almas Ali Javinda, FTO Advisor (Legal) stated that the president’s order would also benefit thousands of farmers who paid excessive sales tax to the said company for the purchase of tractors at higher prices.

The M/s MTL committed alleged tax fraud by committing Benami transactions and using the computerised national identity card numbers (CNICs) of many individuals.

“It is a mega tax fraud committed by this tractor manufacturing company. The company has used black money to claim sales tax refunds during the last four months. The refund of Rs12 billion has been committed through Benami transactions. The FBR has initiated recovery proceedings against the company. On verification/confirmation of fraud through audit, the FBR may initiate criminal proceedings against the said company and Large Taxpayer Office Lahore officials”, FTO Advisor Legal stated.

Such camouflaging transactions in the garb of engineered purchases attributed to fake buyers/growers/farmers shield the particulars of black money investors by misusing CNICs of unrelated persons and investments made and profits earned by the beneficiaries remain concealed and untaxed, FTO Advisor (Legal) said.

The president, in his decision, has observed that since FBR has already initiated audit proceedings against the MTL for Tax Years 2018-2022 which are currently under process, any interference in the matter is likely to prejudice the independence of the competent authority and is thus being avoided. The order also requires FBR to provide proper opportunity to MTL so that their viewpoint is also made part of the audit report, the president's order added.