Illegal input tax adjustments: amount surpasses Rs 100 billion mark

The amount detected through illegal input tax adjustments has crossed Rs 100 billion, which is based on the data compiled by the Taxpayers Audit Wing of the Federal Board of Revenue (FBR). Sources told Business Recorder here on Monday that the latest figure of the illegal input tax adjustments has surpassed Rs 100 billion.
The Board has detected discrepancy in the data of the suppliers and input refund claimants, which took the total amount of illegal adjustments to over Rs 100 billion. The Board has already constituted a high-level committee headed by FBR Member Legal Muhammad Aqil Usman (BS-21 official) to deal with the issue of illegal sales tax adjustments at policy level. The FBR has started developing a preventive system to check illegal sales tax adjustments in future. The committee has been given the task to finalize its recommendations and submit them to the Board.
The committee is scrutinising the existing data of illegal input tax adjustments claims detected by the Directorate General of Intelligence and Investigation FBR and field formations with reference to classes of business, area like Regional Tax Office (RTO)/person and quantum of evasion for trend analysis. Secondly, the committee is further probing the modus operandi of fraudsters and present tactics (legal sales tax, income tax systems and connivance of the department, etc).
Thirdly, the committee has been given the mandate to analyse the risk area relating to the existing procedures, processes and system involved in payment of input tax adjustment. Fourthly, the committee has been given the assignment for conversion of sales tax input claims from invoice-based to payment based. This means that the tax adjustment would only be allowed after making payment to the relevant supplier after completion of the transaction. This would require amendment in section 7 of the Sales Tax Act 1990 as it would change procedure for claiming input tax adjustment, sources stated.
Fifthly, the committee would examine the existing legislation and required amendments in the law/rules with analysis of present litigation. Sixthly, the committee would propose systemic solution of problems ensuring uniformity of actions and other administrative measures needed to control illegal input tax adjustments claims.