Use of CNICs to buy sugar stocks: FBR issues notices to unregistered persons

ISLAMABAD: The Federal Board of Revenue (FBR)’s filed formations have issued notices of sales tax compulsory registration and income tax recovery to certain individuals, whose computerized national identity card numbers (CNICs) were used to purchase sugar from mills.

Tax experts told Business Recorder that the FBR has communicated the list of un-registered buyers of sugar to the field formations for compulsory registration with the sales tax department. In certain cases, the petitioners and teachers have complaints that their CNICs have been used to procure huge quantities of sugar without their knowledge. They received notices of sales tax registrations and income tax recovery from the tax offices. Some petitioners and teachers were surprised that how the FBR can communicate the list without any verification.

The field formations of the FBR have targeted these unsuspected individuals.

For example, one of the notices issued to a retired pensioner claimed that he is a sugar dealer and involved in running a business of purchase and sale of sugar. The RTO has claimed to have received definite information from a third party on purchases of sugar from a sugar mill and having concealed these purchases when submitting income tax return.

Experts further said that many individuals are at risk including pensioners, retired Individuals and widows who are at risk of the scam.

They said the FBR should investigate that whether the sugar mills are fraudulently issuing fake purchase invoices to FBR declaring their sales. The identity of the buyer is masked by using CNIC of the individuals who are not aware of the transaction. They said the unsuspecting individuals are sent notices by FBR, ‘harassing’ them to register for sales tax and provide explanation of purchases that were done using their CNIC in a harassing and threatening manner.

The taxpayer is then left at the mercy of the FBR to provide documentary evidence that will support their stance. The notices sent to the taxpayer are issued in threatening and intimidating tone.

It is surprising to note that the sugar mills allegedly involved in the scam are not accountable for their purchases or providing any proof to FBR to substantiate their sales. The FBR’s field formations are not asking sugar mills to explain the position of these un-registered buyers based on the CNICs’ list.

Multiple individuals have reported being affected during the said exercise through issuance of notices by the FBR’s field formations.

Furthermore, taxpayers are left at the mercy of the FBR and they have to provide proof as to why they should not be penalised. This has affected many people who are mostly old, illiterate or are facing hardship in life.

Tax experts have urged upon the FTO to investigate the whole matter to check such kind of targeting of old age people including widows.

Recently, the FTO has conducted a “Sectoral Analysis Exercise”, aimed at hitherto non-NTN holders/ non-filers distributors of sugar industry, who have been buying huge quantities of sugar from sugar mills/ manufacturers but they were not registered with the Inland Revenue Department.

The information received through FBR indicated that out of the given data, a total of 333 buyers were registered with sales tax 491 with income tax while a staggering 130,576 were not registered with sales tax and 114,029 buyers were not registered with income tax.

During an analysis of the data it was observed that these unregistered buyers being whole-sellers, dealers or distributors are also required to be registered under Sales Tax irrespective of value of turnover/ supplies in terms of Section 14(e) of Sales Tax Act, 1990. Further, these unregistered persons/ entities are easily identifiable because sugar mills are required to maintain records of supplies made during the tax period and issue tax invoices indicating name, address, description, quantity, value of goods, CNIC or NTN of the unregistered person to whom supplies were made and the amount of the tax charged under Section 22 and 23 of Sales Tax Act, 1990. Above all, being a private limited company, it is bound to maintain a complete record of all transactions under SECP’s regulations, Sales Tax Act, 1990 and Income Tax Ordinance 2001.

The Office of the FTO has received reports that the bulk of their sale is being made to the unregistered persons/ non-NTN holders/non-filers, who were liable to be registered in Sales Tax, as well as, in Income Tax. However, despite making huge monetary transactions, these potential investors go scot-free without disclosing their identity and remain outside the tax net.

It was concluded that the field formations were not vigilant in procuring information related to unregistered buyers as per declaration in Annexure ‘C’ of monthly Sales Tax Return. The field formations appeared to be content with just whatever is being submitted in monthly Sales Tax Return. The data of unregistered buyers was not being examined for the purpose of broadening tax net.

Copyright Business Recorder, 2022