Staff Reporter
Islamabad
Federal Tax Ombudsman (FTO) has directed FBR to initiate criminal proceedings against the person(s)/registered person(s) found involved in committing tax fraud with no further delays. FTO has further directed FBR to ensure application of relevant provisions of Pakistan Penal Code along with provisions of Section 21 and 37A of the Sales Tax Act, 1990 while dealing with cases of fake invoices.
An own motion investigation was initiated to investigate irregularities committed by the FBR field formations, while processing and sanctioning of bogus sales tax refunds, involving preparation of fake and flying invoices.
The fraudulent entities obtained sales tax registration for issuing fake sales tax invoices to enable other registered persons for claiming bogus refund, input tax credit and reduce their tax liability. It was found that due to lack of credible institutional mechanism to verify transactional details, uploaded by buyers and sellers, cases of tax evasion and colossal loss to national exchequer occurred.
In response to the notice of the FTO, the department contended that the matter of fake sales tax registrations and issuance of dubious refunds based on fake and flying invoices was rampant in the years 2012 to 2015. Efforts to address such cases have been made. However, these efforts are termed “NOT ENOUGH” by Honorable Federal Tax Ombudsman.
Federal Tax Ombudsman’s Own Motion decision states that falsifying of sales tax invoices to understate the tax liability or overstate the entitlement to tax credit or tax refund or cause loss of tax had been defined as ‘tax fraud’ under Section 2(37) of the Act. However, factually in none of the cases, penal and punitive actions were initiated by the Department, except suspending/blacklisting the Sales Tax Registration of the culprit.
