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ISLAMABAD: The Directorate General Intelligence and Investigation Inland Revenue (I&I-IR)’s national enforcement drive has resulted in the detection of illegal adjustments of input tax of around Rs70 billion and arrest of dozens of fraudsters involved in sales tax frauds during four months period of May-August 2023.

Sources told Business Recorder that the directorate enforcement’s drive has intensified efforts to arrest the fraudsters involved in sales tax frauds by invoking relevant provisions of the Sales Tax Act, 1990.

The tax frauds have been witnessed in some of the major sectors and industries. The directorate has also arrested those tax lawyers and advisers who were assisting the fraudsters in committing tax fraud.

Details of the performance of the directorate received at the Federal Board of Revenue (FBR) revealed that in order to curb the menace of illegal input tax adjustment and issuance of fake/ flying invoices under Sales Tax Act, 1990, and to provide a level playing field to the genuine taxpayers, the Directorate General of I&I-IR initiated enforcement drive across the country against fraudsters involved in such criminal activities.

Tax recovery by field formations: FTO summons Member Inland Revenue (Operations) FBR

The Directorate of I&I-IR initiated proceedings under enforcement sections 37A, 37, 38, and 40 of Sales Tax Act, 1990. During the period of May to August 31, 2023, performance of the directorate of I&I-IR has been witnessed in all major cities of the country.

The agency’s proceedings initiated under section 37A (power to arrest and prosecute) of Sales Tax Act, 1990, revealed that 15 FIRs were registered against 415 accused persons. Out of this, 26 accused were arrested who were involved in sales tax frauds of over Rs37 billion, whereas, the amount recovered was over Rs400 million.

The sectors in which such sales tax frauds were detected included coal, oil and ghee, textile, paper and board, steel, lead, lead waste, and scrap.

The directorate has also initiated proceedings under Section 37 (power to summon persons to give evidence and produce documents in inquiries) and Section 38 (authorised officers to have access to premises, stocks, accounts and records) of Sales Tax Act, 1990, against 446 persons. The sectors in which such frauds were detected are coal, iron/ steel, textile, cotton ginner, lead waste and scrap, copper wire, textile, auto parts, plastic goods manufacturing, and fashion design. Huge revenue of over Rs29 billion was involved in illegal input tax adjustment/ fake/ flying invoices committed by 446 persons. The amount recovered from such fraudsters is over Rs306 million.

The agency has also initiated proceedings under Section 40 (searches under warrant) of Sales Tax Act, 1990, against eight persons within the sectors of ceramic, furniture, aluminium and electronics. Interestingly, the directorate has recovered a huge amount of nearly Rs2 billion, out of the amount detected of approximately Rs3 billion during the period under review.

It is important to note that in four months illegal adjustments of input tax of around Rs70 billion have been unearthed, Rs2.810 billion have been recovered and the culprits involved were arrested.

Moreover, the Directorate of I&I-IR, Multan lodged FIR against M/s GHZ Enterprises (Private) Limited engaged in tax fraud under section 2(37) of Sales Tax Act, 1990, by claiming fake input tax amounting to Rs153.114 million. The refund payment order (RPO) amounting to Rs91.997 million was issued in favour of accused, however, after intimation to chief CSTRO by the Directorate General payment against said RPO was stopped.

Sources added that the directorate is committed to continue this enforcement drive against fraudulent elements and to prosecute such culprits in the court of law.

Copyright Business Recorder, 2023

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