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FBR unearths Rs3.5 billion of tax evasion by importers

By Shahnawaz Akhter
November 01, 2020

KARACHI: The Federal Board of Revenue (FBR) has unearthed Rs3.5 billion of tax evasion by importers in connivance with the tax officials in a case related to bogus input tax adjustments, it was learnt on Saturday.

The Regional Tax Office (RTO) Islamabad cracked the scam after probe into the local supplies of commercial importers of cement and vegetables.

The tax office said the fraudsters adopted a novel way with the help of officials of Pakistan Automation Revenue Authority Limited (PRAL). They hacked or used user ID of various taxpayers who were dormant but present on the FBR system.

“A number of cases have been identified in the scam where ID and password are hacked or used which is not possible without involvement of IT personnel of PRAL,” the RTO Islamabad said in a report available with The News.

The RTO Islamabad identified around 40 units are involved in sales tax input adjustment of Rs3.5 billion made on the basis of fake and flying invoices during tax period from 2018 to 2020.

The RTO Islamabad initiated action against units falling under its jurisdiction. The tax office asked other tax offices to take action and update the FBR about the proceedings by November 15.

The RTO Islamabad approached concerned tax offices including Large Taxpayers Office (LTO) Karachi, LTO Islamabad, Corporate Tax Office Karachi, RTO Quetta and RTO Rawalpindi for physical verification of the taxpayers whose ID were used for availing input adjustments through fake and flying invoices.

“Commercial importers are major source of fake/flying invoices,” the RTO Islamabad said. “The importers who are engaged in import of household goods, garments, hardware items usually sell such items to end consumers or unregistered person to avoid payment of further tax on one hand and at the same time against the huge balance of input tax they issue fake/flying invoices to registered taxpayers of different sectors who claim inadmissible credit adjustment to reduce the sales tax liability.”

In such a way, the evaders receive illegal gratification from the registered taxpayers at the cost of government revenue and evade further tax actually payable against supplies made to unregistered individuals.

“Last six sales tax returns (null returns) are filed on a single day to change the status from dormant to active taxpayers, and subsequently, they file two or three more null returns,” it said.

“Huge amount of bogus input tax is created by manipulating the system and fake invoices are issued from unknown locations using such accounts.”

The RTO Islamabad said the invoices are circulated in two or three more hands falling under different tax offices before handing over to actual beneficiaries to make an escape from the radar of the FBR.

The tax office said most of the fake and flying invoices are generated on imported coal, onion and potatoes from Afghanistan.