FBR unearths Rs522mtax fraud in Lahore

LAHORE: Federal Board of Revenue has unearthed Rs522 million tax fraud by dummy textile units in Lahore in 11 different cases which are availing tax exemptions of the manufacturers while on ground there is no plant.

The sources in FBR disclosed that director general Intelligence and Investigation Inland (I&IR) Revenue Shad Muhammad initiated countrywide crackdown on tax evasion by different sectors during the last five years (July 2014-September 2018) in order to plug the loopholes in the system, besides recovering evaded taxes by the businesses.

On the instruction of the DG I&IR, Directorate of I&IR Lahore investigated 11 different cases which were doing dubious trading activities and getting sales tax exemptions under SRO 1125/2011. These 11 units declared themselves manufacturers of the garments but when I&IR Lahore officials conducted investigation no manufacturing units were found on ground at the addresses declared by these dummy units.

The registered persons were actually commercial importers. However, in the garb of manufactures they are abusing the benefits of SRO 1125/2011 in the form of the zero rating or reduced rate of sales tax pertaining to the textile sector, the sources disclosed. The FBR in budget for fiscal year 2011 has zero rated five exporting sectors including textile. The FBR has given zero-rated or reduce rate of taxes benefits to every such person doing business in textile (including jute), carpets, leather, sports and surgical goods sectors, who is registered as manufacturer, importer, exporter and wholesaler.

These 11 companies registered themselves as “Manufacturers” to avail the benefit. However, on site visits it was found that these units are either non-existent or they do not possess the requisite manufacturing facility to consume the imported raw material. I&IR instructed the chief commissioners of I&IR to suspend and blacklist these dummy and fake units. Further proceedings against the units are initiated to recover the sales tax including criminal proceedings. An FBR official said the effort is part of ongoing nationwide exercise of the DG I&IR to nab the miscreants who are abusing the provisions of SRO 1125/2011 as the textile sector taxpayers and clean businesses also raised the issue and expressed their concern. These fake units were making the taxpaying units non-competitive.

The official said several more such cases are under scrutiny and it is expected that during the ongoing month more cases will be identified and proceedings will be initiated to recover billions of rupees revenue loss.