Sources told Business Recorder here on Thursday that detection of three major cases of fake and flying invoices by the agency has confirmed that the phenomenon of fake and flying invoices has resurfaced to claim illegal input tax adjustments on the invoices of tax fraudsters. Directorate General of Intelligence and Investigation IR has intensified its efforts to control this phenomenon of fake and flying invoices. The ongoing exercise headed by its director general I&I IR would help in controlling the quantum of inadmissible input tax adjustments across the country.
Details of the cases revealed that Director General I&I-IR, Khawaja Tanveer Ahmed has launched a countrywide campaign against tax fraudsters. On the basis of credible information, the Directorate of I&I-IR, Peshawar initiated sales tax audit and inquiry in cases of M/s ADN Traders, Peshawar, M/s KD Trading, Peshawar & M/s SG Asia Traders, Peshawar under sections 25 and 38 of the Sales Tax Act, 1990. The initial findings of the proceedings reveal that registered persons are, prima facie, involved in tax fraud as defined in section 2(37) of the Sales Tax Act, 1990. The taxpayers are commercial importers of consumer goods like battery, bulbs, cloth buttons, glass beads, padlock, school bags, etc, but declaring their sales to registered persons including the industrial units. All of them have claimed huge purchases and declared low sales. Most of the sales invoices are split into less than Rs 50,000 value to avoid compliance of section 73 of the Sales Tax Act, 1990. The style of conducting fraud by all three units is the same and they all do not exist on the registered business premises. The suspicion of fraud strengthened by the fact that some buyers of different cities are already blacklisted. Further scrutiny revealed that their business capitals are also not commensurate with the volume of declared closing stocks.
The nature of goods imported by the registered persons are unrelated to the business of buyers and conclusion can be safely deduced that buyers are claiming illegal input tax on the basis of flying invoices. On the recommendations of I&I-IR Peshawar, the chief commissioner-IR, RTO Peshawar, has suspended sales tax registration of the taxpayers during March 2017 under section 21(2) of the Sales Tax Act, 1990 read with Rule 12 of Sales Tax Rules, 2006 till completion of pending audit and inquiry. Moreover, the Peshawar Directorate has pointed out buyers of flying invoices, located in jurisdictions of different tax offices, who have, prima facie, claimed unlawful input tax adjustments on the invoices of tax fraudsters. Apparently, these are big cases of sales tax evasion.
Copyright Business Recorder, 2017