KARACHI: The Federal Board of Revenue (FBR) blacklisted sales tax registration of around 25 units in paper/packaging industry for obtaining refunds on fake invoices.
These companies, registered with the Regional Tax Office (RTO) Karachi, had claimed around Rs870 million during the tax year 2012-13.
However, the post-refund audit detected discrepancies in their transactions which also exposed the inefficiency of the officials concerned in issuing such huge amounts without proper scrutiny.
Commenting on the issue, a tax official said that the real problem was within the output stage where the manufacturers purchase raw material (scrap paper) from mostly unregistered sector, adding that to reduce their sales tax liability, they declare less volume which was estimated to be 20 percent. He claimed that around 80 percent of the manufactured paper was concealed as they remain unable to get input adjustment from their unregistered sellers.
The official said that various fake companies who managed to get sales tax registrations, obtain refund claims on the basis of transactions. In the past, tax offices had demanded to invoke Section 40B of the Sales Tax Act, 1990 but were denied by the FBR authorities.
The Section 40B of the act describes about the posting of an Inland Revenue Officer and said: “Subject to such conditions and restrictions, as deemed fit to impose, the board, may post an officer of the Inland Revenue to the premises of registered person or class of such persons to monitor production, sale of taxable goods and the stock position provided that if a commissioner, on the basis of material evidence, has reason to believe that a registered person is involved in evasion of sales tax or tax fraud, he may, by recording the reason in writing, post an officer of the Inland Revenue to the premises of such registered person to monitor production or sale of taxable goods and the stocks position.”
In the present case where 25 companies had been suspended, most of them are involved in printing of exercise notebooks.
The tax officials said that if worked back the combined claims of Rs870 million on the basis of 16 percent sales tax and 25 percent cost, the real value will become Rs5.23 billion.
Although these companies have been blacklisted, no tangible measures could be taken for the recovery of the due amount.