FBR probes 5 OMCs on tax evasion suspicions

KARACHI: The Federal Board of Revenue (FBR) has initiated scrutiny of sales and stocks of five major oil marketing companies (OMCs) on suspicions of under-reporting to evade tax, sources said on Friday.

“The tax authorities have detected mismatch in supplies and sales tax collection from these oil marketing firms,” an official at Large Taxpayers Unit (LTU) Karachi, said.

“Initially, tax authorities have collected the data of OMCs’ sales and stocks and later on they will conduct a physical audit.” The investigation was launched after sales tax collection decreased 14 percent to Rs13 billion in October 2018, compared to Rs15 billion in the same month last year.

The official said the OMCs stopped the sales around five days ahead of month-close, expecting a hike in the prices of petroleum oil lubricants (POL) products. “Later, the stock was being sold at higher prices through back-dated invoices to dodge taxation,” the official said.

Admitting that the sales tax rate on petroleum products had been reduced significantly, the official said the retail prices have increased exorbitantly during the last one year. “However, there is still a mismatch of sales and revenue collection and tax authorities believe OMCs are involved in concealment of information,” the source added.

According to an estimate, prepared by the LTU Karachi, the continuously reduced rate of sales tax on two main items, i.e. motor spirit and high speed diesel (HSD), likely negatively impacted the collection. Collection from these two heads nearly halved to Rs15.7 billion in November 2018 compared to Rs29 billion in the same month of the last year.

The source said the lower sales tax rate on POL products had already dented collection during the first three months and the unit estimated the revenue loss was likely to reach a staggering Rs60 billion during the first half (July–December) of current fiscal year.