Tax evasion: two major cases of commercial importers detected

Directorate General of Intelligence and Investigation Inland Revenue (IR) Peshawar has detected two major cases of commercial importers involved in tax evasion by claiming illegal input tax on the basis of flying invoices. According to sources, it is very interesting that every day tax fraudsters invent a new technique for tax evasion and Directorate General of I&I-IR, the intelligence department of FBR, is proving itself equally good in detecting the method and neutralizing it.

The campaign of Directorate General Intelligence & Investigation-IR against tax evaders continues as Peshawar Directorate detects two registered persons, having status of commercial importers, involved in tax evasion by way of using almost the same techniques. The directorate initiated sales tax audit and inquiry in both cases and finds that, prima facie, both the registered persons are involved in tax fraud as defined in Sales Tax Act, 1990.

Both registered persons of commercial importers of consumer goods like calculators, ladies shoulder bags, sunglasses, polyester blankets, door locks, torch, kitchen tools, padlock, baby diapers and motor oil etc. but are declaring their sales to industrial and manufacturing units. The nature of imported goods is unrelated to the business of buyers and it can be safely deduced that buyers are claiming illegal input tax on the basis of flying invoices. The scheme of fraud is that the importers issued flying invoices against some dirty money enabled their buyers to reduce the payable amount of tax by adjusting input tax of flying invoices against their output. Collectively both the importers of Peshawar have issued flying invoices involving dubious input tax amounting to Rs 131 million to more than fifty buyers of Karachi, Lahore, Faisalabad, Gujranwala, Sargodha, Multan and Sukkur. Accordingly, these buyers, fraudulently, paid less tax and caused loss of Rs 131 million to National Exchequer. It is pertinent to mention here that, most of supplies made by importers were split into less than Rs 50,000/- value to avoid compliance of section 73 of the Sales Tax Act, 1990 which requires payment through banking channel to claim input tax against invoice having value more than Rs 50,000. The declared business capitals of the two fraudsters of Peshawar, are also not commensurate with its declared value of closing stocks. In order to verify the stocks, teams of Peshawar Directorate visited separately on the declared business addresses of importers but they are not available there. Accordingly, it has been proposed to the Chief Commissioner IR, RTO Peshawar to suspend/blacklist the registrations of both the fraudsters. Moreover, Khawaja Tanveer Ahmed, the Director General, has directed the directorates of Lahore, Karachi, Faisalabad, Multan & Hyderabad to initiate proceedings against the buyers of flying invoices in their respective jurisdictions.