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ISLAMABAD: The Federal Board of Revenue (FBR) has directed the tax officials to investigate cases of commercial importers, dealers/distributors of large companies and dealers of petroleum products which are generally engaged in issuing flying invoices.

Through instructions issued on Friday, the FBR has also directed the tax officials to immediately register first information reports (FIRs) against any registered unit found to be involved in fake/flying invoices to evade sales tax and claim illegal refunds.

In this regard, the FBR on Friday issued a Standard Operating Procedure (SOP) for the tax officials to effectively deal with the cases of involving fake/flying invoices.

Directorate I&I detects mega scam of fake ST inovices

Focus on the cases of commercial importers, dealers/distributors of large companies and dealers of petroleum products which are generally engaged in issuing flying invoices. In such cases, a diligent comparison of goods imported/purchased with the nature of business of the buyers shall help establish the wrong-doing by the registered persons, the FBR’s instructions added.

The FBR will suspend and cancel licenses of e-intermediaries involved in cases of fake/flying invoices.

According to the procedure issued on Friday, the cases have emerged which establish the huge frequency of use of fake/flying invoices by the registered persons thereby compromising not only the government’s revenues but also creating legally-inadmissible refunds.

Hence, in order to create uniformity in approach and consistency in reporting line and to deter the use of fake and flying invoices and effectively eliminate such malpractice, the Board has formulated and implement, with immediate effect, the SOP. The FBR directed the field officers that the present loose and liberal enforcement regime has emboldened the unscrupulous registered persons to indulge, without the fear of being caught, in the lucrative business of use of fake/flying invoices.

The officers, on having established the case of tax fraud in using lake/flying invoices, shall not stop short of registering an FIR against the perpetrators of such tax fraud under the relevant legal provisions and shall vigorously pursue their cases during the prosecution stage. The officers shall, with the help of automated systems, find out the IP addresses. Coordinates, etc, of the perpetrators of such crime and take statutory action accordingly.

It is not possible that so many firms/businesses keep on operating openly and defiantly by issuing false sales tax invoices which are used by a wide range of beneficiaries to cause huge loss of revenue, without the knowledge, active assistance and connivance of some officials of the department.

The Chief Commissioners and Commissioners IR shall therefore, keep constant vigilance on their RTO staff to detect any such activity and based upon evidence of complicity, to take swift action against the departmental official(s) found involved or in connivance with such persons who are using fake/flying invoices.

Moreover, whenever any widespread fraud is detected in an RTO; responsibility should also be fixed on those officials who neglected to detect such activity and take appropriate legal action at the earliest.

The FBR said that the tax officials shall particularly focus, inter alia, on the following characteristics of registered persons’ declarations for discovery of fraudulent use of fake/flying invoices:

(a) High volume or value of transactions with little or no net sales tax payment.

(b) Value of purchases and input tax thereon are equal or greater than the value of supplies and output tax respectively.

(c) Consistently huge carry forwards, with unrealistic levels of stocks.

(d) Meager capital amount declared in wealth statement/company’s accounts vis a vis huge stocks.

(e) Use of frequent & huge credit notes to avoid payment of due sales tax.

(f) Recent registration, usually less than 2 years, with high value purchases or supplies or sudden start of voluminous transactions after a long dormant period.

(g) Registered persons’ addresses in low income, residential or remote areas.

(h) Income tax returns are either not filed, or filed with very low income.

On identification of the dubious/bogus/dummy registrations or use of fake/flying invoices by the registered persons, their registration, in accordance with the statutory procedure, must be immediately suspended by the concerned Commissioner of Inland Revenue. Such suspension must follow with the prompt statutory action for blacklisting, the FBR directed.

Copyright Business Recorder, 2023

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