Rs12bn tax refund ‘fraud’: Alvi directs FBR to restore probe against MTL

ISLAMABAD: President Arif Alvi has directed the Federal Board of Revenue (FBR) to restore investigation against M/s Millat Tractors Ltd (MTL) against alleged inadmissible sales tax refund of over Rs 12 billion obtained on “Benami” transactions for tax period 2018-2022.

Addressing at a press conference on Wednesday at the FTO Headquarters, Almas Ali Javinda, Advisor (Legal), Muhammad Nazim Saleem, Advisor (Sales Tax) and Muhammad Naseer Butt, Advisor (Income Tax) explained that the President has dismissed representations filed by the FBR and the MTL and endorsed the order of the FTO for initiation of recovery proceedings against the said company.

Nazim Saleem, FTO Advisor (Sales Tax) said that the gist of the issue is that MTL had charged 5 percent sales tax from the buyers on their tractors but failed to deliver tractors before June 30, 2022 in sheer violation of definitions of “time of supply” as stipulated in section 2(44) of the Sales Tax Act 1990.

The FBR officials ignored and neglected all violations committed by the said company.

Equally important is the fact that sales tax was abolished on the supply of tractors w.e.f July 1, 2022. When the complainants approached MTL for refund, they refused to entertain their requests. Consequently, these

buyers filed complaints against MTL before the FTO, FTO Advisor (Sales Tax) added.

President’s order said that the FBR has initiated post refund audit and sales tax audit of the said company, which will reach its logical conclusion.

Almas Ali Javinda, FTO Advisor (Legal) stated that the President’s order would also benefit thousands of farmers who paid excessive sales tax to the said company for purchase of tractors on higher prices. The M/s MTL committed alleged tax fraud by committing Benami transactions and using computerized national identity card numbers (CNICs) of many individuals.

“It is a mega tax fraud committed by this tractor manufacturing company. The company has used black money to claim sales tax refund during the last four months. The refund of Rs 12 billion has been committed through Benami transactions. The FBR has initiated recovery proceedings against the company. On verification/conformation of fraud through audit, the FBR may initiate criminal proceedings against the said company and Large Taxpayer Office Lahore officials,” FTO Advisor Legal stated.

Such a camouflaging transactions in the garb of engineered purchases attributed to fake buyers/ growers/ farmers shield the particulars of black money investors by misusing CNICs of unrelated person and investments made and profits earned by the beneficiaries remain concealed and untaxed, FTO Advisor (Legal) said.

Javinda said that the FBR has taken two steps immediately to stop the company from claiming new refunds. The FBR has already initiated audit proceeding against the MTL for Tax Years 2018 to 2022. Secondly, the processing of further refund claims of the said company has been stopped.

The President in his decision has observed that since FBR has already initiated Audit proceeding against the MTL for Tax Years 2018-2022 which are currently under process, any interference in the matter is likely to prejudice the independence of the competent authority and is thus being avoided. The order also requires FBR to provide proper opportunity to MTL so that their view point is also made part of the Audit report, the President’s order added.

Copyright Business Recorder, 2023