Multibillion rupees sales tax refund scam unearthed

KARACHI: Tax authorities have unearthed another sales tax refund scam, estimated to have caused billions of rupees losses to national exchequer, official sources revealed on Tuesday.
They said the Directorate Intelligence and Investigation (Inland Revenue) Karachi discovered the release of sales tax refund to 30 companies engaged in sales/purchase on fake and flying invoices.
“The scrutiny revealed that the companies were bogus,” said an official at the directorate on condition not to be named. “They exchanged the fake invoices with the registered and tax compliant companies.”
On Monday, the directorate conducted a physical raid and arrested Arshad Ali Khan of Kotila Corporation, which allegedly ripped off around Rs100 million in tax refund. On Tuesday, the directorate obtained 14-day remand of the culprit from the Customs Court.
The sources said that the directorate was tracing the accomplices in the scam. They said the tax department will blacklist the companies involved in sales/purchase on bogus invoices.
Most of the companies, which managed to wrongfully grab sales tax refund against inputs, were registered with the Regional Tax Office-II (RTO) Karachi.
In November last year, the intelligence wing had discovered around 144 dummy companies registered with different RTOs of Lahore, Faisalabad and Karachi, a commissioner at RTO-III Karachi informed the tax authorities. These companies were said to have incurred Rs7.5 billion loss to national exchequer.
In early last year, RTOs Lahore, Faisalabad and Karachi had blacklisted thousands of units after finding that they got hold of Rs40 billion refunds on fake and flying invoices.
Earlier, the Federal Board of Revenue cancelled registration of more than 4,000 fake companies with the RTOs in its major crackdown started in July 2013.