‘Transactions’ through fake firm: FBR unearths massive Rs214.8bn sales tax fraud

KARACHI: Directorate of Internal Audit IR, Karachi has unearthed a massive sales tax fraud perpetrated by a “shell” company, which has caused an astonishing loss of Rs. 314.81 billion to the national exchequer.

According to the details, the fraudulent entity, operating solely on paper, manipulated the sales tax system in a scandal that threatens to have far-reaching consequences.

The Directorate has conducted a detailed analysis of the records, which revealed the shocking findings regarding the shell company’s operations.

GST evaded through flying invoices estimated at Rs5-6trn

The said company was discovered to be a fictitious entity with no genuine physical operations. It was created solely for the purpose of generating fake input data to understate the sales tax liability of other legitimate firms. This sham company had never engaged in any genuine sale or purchase activities, with no physical movement of goods occurring on either side of its operations.

This company primarily dealt with iron, steel, and food products, and during the period of April 2023, it engaged in bogus transactions worth Rs. 1,748.96 billion, involving a staggering tax amount of Rs. 314.81 billion. Most of these fake purchases were made from two companies, complicating the investigation further.

This tax fraud, in accordance with section 2(37) of the Sales Tax Act 1990, has inflicted a colossal loss of Rs. 314.81 billion to the national exchequer.

Copyright Business Recorder, 2023